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Tether (USDT)

Tether (USDT) is a  pegged 1:1 to the U.S. dollar launched by the company Tether Limited Inc. in 2014. As of July 2022, Tether Limited has minted the USDT stablecoin on ten protocols and . Tether Limited is owned by Hong Kong-based company iFinex, which also owns . [1][2][3]

Overview (USDT)

Tether (USDT or USD₮) is a designed to maintain a stable value by pegging it to the value of a , such as the US Dollar. Each USDT token is intended to be equivalent to one US Dollar, providing a stable and predictable value compared to more volatile cryptocurrencies like or .

Tether was issued on the through the Omni Layer Protocol. Each unit of Tether is said to be backed by actual assets in the Tether Limited reserve and may be redeemed via its platform. The primary objective is to facilitate transactions between exchanges with a rate fixed to the United States dollar allowing traders to take advantage of high-speed arbitrage opportunities without resorting to slow bank wires.[6]

Tether is the first to be created and the most popular stablecoin used in the cryptocurrency ecosystem. Tether Limited attaches the value of a coin to the price of fiat currencies such as the US dollar, Euro, and Yen.[7]

According to Tether Limited, the tether is fully reserved i.e. the total number of tethers in circulation is less than or equal to the remaining balance of fiat currency in its reserve. Exchanges have been the primary users of USDT as an alternative to fiat currencies, which minimizes or eliminates the need to maintain external banking relations. Some of the notable exchanges that utilize Tether include , , , , , , Liquid.io, and .[7]

Overview (Tether Limited)

Early Beginnings (2014-2015)

Tether, initially known as Realcoin, was founded in July 2014 by , , and . It was later rebranded to USTether and then to USDT in Novem 2014. USDT which was initially built on the blockchain using the Omni platform is now supported on multi-chains including the , , , , , OMG Network, , and blockchains.

wiki
Tether was created as an attempt to solve two major issues with existing cryptocurrencies: high volatility and convertibility between and cryptocurrencies. Tether developed a that is fully backed 1:1 by bank deposits of U.S. dollars to overcome these alleged difficulties. While Tether used the Omni layer to represent USDT tokens on , tokens were used to represent USDT tokens on . While the tokens themselves operated in a decentralized network, Hong Kong-based Tether Ltd was solely responsible for creating and redeeming tokens as well as maintaining the 1:1 deposit backing.[9]

Further Development (2018-2024)

In November 2018, Tether announced Deltec as its new banking partner to quell rumors about its solvency raised by the associated crypto exchange, .[10]

In March 2019, Tether updated its disclosure statement and stated that its tokens are no longer fully backed by deposits in U.S. dollars. Instead, Tether is now fully backed by reserves, which include conventional currency, cash equivalents, and occasionally other assets and receivables from loans that Tether has given to third parties, including perhaps connected organizations. [11]

In October 2023, , former chief technology officer for Tether, was promoted to the position of CEO for the company. He will lead the company starting in December 2023, succeeding . [36][41]

On June 24, 2024, Tether announced plans to immediately discontinue support for its USD₮ token on the and  blockchains. This decision followed an extensive review of these platforms, assessing factors such as security architecture, community engagement, and overall utility. [46]

"We will continue to support the protocols and chains that the community finds useful and encourage the community to expand the use cases of USD₮ on every protocol." - the team wrote[47]

Tether Enters the Latin American Market

In May 2022, Tether announced the launch of MXNT, a new backed by the Mexican peso. Following earlier launches of its USDT, EURT, and CNHT stablecoins, tied to the U.S. dollar, euro, and Chinese yuan respectively, the move signified its entrance into the Latin American market. MXNT was initially made accessible on the , , and blockchains.[12]

According to the firm’s former CTO, , the decision to enter Latin America was motivated by the region's rising adoption. Notably, a study by bitcoin payments firm Triple A found that 40% of Mexican businesses were interested in implementing cryptocurrencies in some capacity, with 71% of those in the segment concentrating especially on doing so. [12]

Tether named Mexico a “prime location” for the next Latin American crypto hub. To assess the viability of future fiat-pegged currencies in the region, the launch of MXNT is said to be used to onboard as many new users as possible inside the Latin American market. [12]

In May 2022, Tether's price momentarily dropped to $0.96 as a result of the depreciation of a different stablecoin, TerraUSD (UST), issued by an entity unrelated to Tether or . Tether stated it was continuing to satisfy redemption requests that surpassed 2 billion tokens on May 12 at a ratio of 1 token to 1 U.S. dollar. The price of Tether tokens rapidly recovered to more than $0.99.[13]

Tether Mints $1B USDT

On December 25, 2023, the tracking platform Whale Alert reported that the Tether Treasury had minted $1 billion of its stablecoin, USDT. CEO Paul Ardoino responded to the thread on X saying that the transfer was an “inventory replenishment” on the Network. [43]

"PSA: 1B USDt inventory replenish on Ethereum Network. Note this is an authorized but not issued transaction, meaning that this amount will be used as inventory for next period issuance requests and chain swaps" - Ardoino wrote. [44]

Inventory replenishment is the process of restocking goods to meet customer demand without accumulating excess stock. It involves forecasting demand, placing orders, and considering factors like lead time and safety stock to maintain optimal inventory levels. [45]

Tether notes that its inventory replenishment is the process of creating new USDT that is stored in its treasury inventory as “authorized but not issued” USDT. [43]

"These tokens are not part of the total market capitalization of USD₮, as they have not been issued or released into circulation yet,” the company states on its website.[45]

Integrations

On May 27, 2022, Tether Operations Limited announced the launch of Tether tokens(USD₮) on , a leading development platform. The addition of Tether to the ecosystem offers a new stablecoin option for more than 8,000 teams building on Polygon.[14]

On June 9, 2022, Tether Operations Limited announced the launch of Tether tokens(USD₮) on , a pioneering upgradable blockchain. The addition of USD₮ to Tezos demonstrates its growing momentum as a thriving blockchain of choice for brands and projects looking to build the revolution.[15]

On September 12, 2022, Tether launched Tether tokens pegged to the U.S. dollar on the , a blockchain designed to provide the ideal environment for which is enabled by its unique scaling solution. [16]

On September 23, 2022, Tether announced the launch of Tether tokens(USD₮) on , a decentralized, open-source blockchain platform. The addition of Tether to the Polkadot ecosystem is to increase its presence in decentralized ecosystems.[17]

On October 20, 2022, Tether Operations Limited announced SmartPay's launch plans of tether tokens (USD₮) in over 24,000 ATMs across Brazil.[18]

On December 26, 2022, Tether Operations Limited announced the addition of its offshore Chinese Yuan (CNH₮) to the blockchain. At launch, was the first exchange to enable its users to deposit and withdraw CNH₮ using the blockchain transport layer from the platform. [29]

On January 9, 2023, Tether announced that Tether Gold (XAU₮) will be listed on ICRYPEX[30], one of Turkey’s leading cryptocurrency trading platforms. With this listing, ICRYPEX users can buy and sell XAU₮, a crypto asset that represents ownership of physical gold held in a vault in Switzerland. [31]

Tether Launches Alloy

On June 17, 2024, Tether introduced a gold-backed stablecoin pegged to the U.S. dollar. It is the first tethered asset, the issuer declared. The new coin is called and is mintable on the new Alloy by Tether platform. [48][49]

According to the company, will be overcollateralized by (XAUt) — a token that provides ownership of physical gold — but pegged to the U.S. dollar. By definition, the new token is a synthetic dollar, which is designed to mimic the value and functionality of the U.S. dollar without being directly backed by it.

"Alloy by Tether is an open platform that allows to create collateralized synthetic digital assets and will soon be part of the new Tether digital assets tokenization platform, launching later this year, Paolo Ardoino, CEO of Tether," said in an X post.[50]

The organization also mentioned that other tethered assets, including yield-bearing products, could be created on the platform. The synthetic dollar can be minted by depositing XUSDT through a and price oracles. Thus, users can make transactions with aUSDT while retaining their gold-backed Tether asset. The aUSDT token is targeted for users who want to use crypto for payments and remittances without selling their gold-backed tokens, the press release explained. [51]

aUSDT was developed by Tether subsidiaries Moon Gold and Moon Gold El Salvador. Alloy by Tether will become part of a real-world asset tokenization platform launching later this year, said Tether CEO . [48][51]

Partnerships

Pear Credit

On October 28, 2022, Pear Credit — a credit system that allows issuers to create peer-to-peer credit “tokens” was announced. Pear Credit was founded by Tether, Holepunch[34], and Synonym. It is a peer-to-peer protocol that gives credit issuers a faster, cheaper, and more scalable token format, without relying on or any global shared-state networks. [28]

“We think Pear Credit represents an easy-to-use, scalable module and flexible solution for all the companies in the world that issue credit; gift cards, rewards tokens, travel miles and stablecoins are all possible.,” said Paolo Ardoino, former CTO of Tether.

Tether x INHOPE

On January 26, 2023, Tether Operations Limited announced that they will collaborate with INHOPE[32], the leading global network combatting online Child Sexual Abuse Material (CSAM). Tether will work with INHOPE[32] to share information, facilitate conversations between stakeholders, and take action to drive bad actors out of the ecosystem. Tether is the first cryptocurrency to take a stand with INHOPE[32] against CSAM. [33]

“Working alongside law enforcement, financial intelligence units, lawmakers and standard-setting bodies worldwide, Tether is committed to being a positive force in the crypto space by highlighting the risks of child exploitation and to help organise sensible risk mitigating controls in the cryptocurrency industry. We are especially interested in improving the ability of cryptocurrency businesses to identify transfers related to online CSAM marketplaces and report them to the authorities.” - said Paolo Ardoino, former CTO at Tether.[33]

Tether x Bitkub Exchange x Bitkub Academy

On December 7, 2023,  Tether announced a collaboration with Thailand's crypto exchange, Bitkub Online Co., Ltd. (Bitkub Exchange). The strategic collaboration is aimed at launching a comprehensive educational program targeting the enhancement of literacy and fostering awareness regarding , within Thailand. Together, the companies will craft educational courses, conduct awareness campaigns, introduce incentive-based learning programs, and host regular live Q&A sessions, aiming to empower Thai speakers with insights into the digital financial landscape. [42]

"We are excited about working with Bitkub to drive forward the cause of promoting blockchain literacy. With the stablecoin market rapidly expanding in Southeast Asia, it becomes imperative for communities to comprehend the technology and its diverse applications. - , CEO of Tether, commented[42]

Regulation

In April 2019, the New York Attorney General’s office alleged , who shares the same parent company as Tether of using Tether's reserves to cover up for its $850 million in losses connected to the controversial third-party payment processor known as Crypto Capital. Stuart Hoegner, general counsel for Bitfinex and Tether, filed an affidavit some days later after the NYAG's lawsuit stating that Tether was only backed by 74% cash and equivalents and the other portion was equity in iFinex.[19]

In May 2019, and former Tether CTO,  announced Bitfinex had successfully raised $1 billion in a token sale, which proceeds were used to cover the $850 million in potentially lost funds from Crypto Capital.[19]

Controversy/Litigation

On September 19, 2022, due to an ongoing lawsuit in New York District Court, and Tether (referred to in court records as B/T), were ordered to produce documents showing the backing of USDT, the outcome of which is still pending. [37]

In October 2023, the Wall Street Journal reported that Tether has been increasingly showing up in investigations tied to money laundering, terror financing, and sanctions evasion. The report alleges that Tether appears to have been used in financing Hamas, paying Chinese fentanyl suppliers, funding the North Korean nuclear program, and buying sanctioned Venezuelan oil for sanctioned Russian oligarchs. In response, the company published a blog post denying inadequate customer due diligence and screening practices and describing how they have aided governments with criminal investigations, helping freeze a total of $835 million in assets linked to the theft. [40]

On November 20, 2023, Tether reported that together with  it had frozen $225 million worth of its cryptocurrency which had been linked to a human trafficking group in Southeast Asia responsible for a global pig butchering scam. Tether claimed the freeze had been done at the request of the US Secret Service, and that it was its largest-ever freeze of its token. [38][39]

Legal status

According to the platform's documentation, Tether is not a legal tender currency or a financial instrument. The ownership of Tether has no contractual rights, other legal claims, or guarantees against losses. Tether Limited is not a bank and is not required to, and does not, hold its reserves at the Federal Reserve. Tether tokens are not legal tender currency and are not covered by deposit insurance.[20]

Tether Governance

Tether Limited is the sole entity capable of altering the circulating supply of USDT tokens. When users deposit fiat money into accounts run by Tether Limited, Tether issues tokens, and when users exchange tokens for deposits of fiat money in Tether banks, Tether destroys tokens. [11]

Tether uses a proof-of-reserves approach to demonstrate that reserves are present and the system is financially sound. The system is fully collateralized when the quantity of USDT in circulation equals the amount of money held in accounts managed by Tether Limited. To ensure openness and demonstrate its financial stability, Tether Limited has guaranteed to provide audits of its bank balances on its website.[11]

Other Tether-issued stablecoins are:

  • : pegged to gold’s price
  • : pegged to the common currency of the European Union
  • Tether peso (MXNT): pegged to the Mexican peso
  • Tether yuan (CNHT): pegged to the offshore Chinese yuan

Tether Limited Team

  • - Chief Executive Officer[21]
  • Giancarlo Devasini - Chief Financial Officer[22]
  • Stuart Hoegner - General Counsel[23]
  • Leonardo Real - Chief Compliance Officer[25]
  • Claudia Lagorio - Chief Operating Officer[26]
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Tether (USDT)

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Edited On

July 2, 2024

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