In 2023, a significant global demand for USD liquidity was observed among companies without access to the U.S. financial market. Countries require dollars to service government debts and facilitate trade, yet the United States restricts these flows to maintain leverage. Cryptocurrencies have introduced a new, convenient, and cost-effective way for the world to obtain and transfer USD. Since 2015, the Omni Foundation (later Tether Limited) has issued a token pegged to the dollar’s price. Since then, the USDT capitalization has grown from $950 thousand to $83 billion.
Understanding USDT
With the dawn of crypto assets, it became evident that the market needed an equivalent tied to a stable currency. A coin backed by the dollar allows investors to preserve funds during high volatility. In 2015, the Omni Foundation introduced one of the first stablecoins – Realcoin. In 2018, the founders rebranded it as Tether Limited, renaming the asset to United States Dollar Tether (USDT). In 2023, USDT is the most liquid stablecoin globally, ranking third in market capitalization at $83.3 billion.
How USDT Works
USDT is issued as a token on various networks, including Ethereum, TRON, Binance Smart Chain, Solana, Optimism, etc. When Tether Limited receives funds from individuals or companies, it mints the corresponding digital units. Upon redemption, the tokens are burned, and dollars are returned. USDT can be exchanged across networks on exchanges and through bridges. In the latter case, tokens are minted in one blockchain and burned in another.
Risks
Analysts express concern about the lack of audits by independent companies. Tether Limited publishes consolidated reserve reports without disclosing a precise list of banks and amounts, raising worries about insufficient backing. Some experts fear funds may be placed in dubious institutions with high-interest rates or nonexistent. If this issue becomes widely known, it could lead to panic and a detachment of the coin’s price from the dollar.
