Tether (USDT) is the most widely adopted stablecoin in the cryptocurrency market, designed to mirror the value of the U.S. dollar. However, its reputation is marked by ongoing controversy. While it serves as a key bridge between traditional finance and digital assets, questions about transparency, centralization, and market manipulation persist.
Tether: The Original Stablecoin
Tether was launched in 2014 as a fiat-collateralized stablecoin, meaning each USDT token is claimed to be backed 1:1 by a reserve of real-world currency, typically U.S. dollars. It was created to provide stability in crypto markets, enabling users to trade, store, or transfer value without the volatility of assets like Bitcoin or Ethereum.
Unlike decentralized cryptocurrencies, Tether is issued and managed by Tether Ltd., a subsidiary of iFinex Inc., which also owns Bitfinex, a major crypto exchange. This close relationship has raised concerns over centralization and conflicts of interest.
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Tether’s Blockchain Footprint
USDT originally launched on the Bitcoin blockchain via the Omni protocol. Today, it exists across multiple chains, including Ethereum (ERC-20), Tron (TRC-20), Solana, Algorand, and the Liquid Network. This multi-chain deployment allows Tether to be more accessible and functional across various decentralized applications and exchanges.
Notably, Tether has expanded to blockchains like Algorand and Liquid to improve transaction speed and efficiency. However, this growth also demands greater transparency about reserves and issuance practices—something critics argue is lacking.
Transparency and Controversy
One of the biggest criticisms of Tether is its lack of regular, independent audits. Since 2017, USDT has avoided full financial audits, instead releasing “attestations” that some consider inadequate. The company’s refusal to provide regular and comprehensive proof of reserves has fueled speculation that not all USDT tokens are fully backed.
In 2021, the New York Attorney General’s office investigated iFinex and USDT over claims they concealed an $850 million loss by borrowing from Tether’s reserves. The case concluded with an $18.5 million settlement and a ban from doing business in New York, further casting doubt on Tether’s legitimacy.
Market Manipulation and “Whale” Concerns
Research has revealed that a small number of addresses—often dubbed “USDT whales”—control the majority of USDT supply. This concentration raises red flags over potential price manipulation. Critics argue that sudden surges in Tether issuance may be used to inflate Bitcoin’s price, citing instances such as the 2017 bull run.
Additionally, large reserves of Tether on centralized exchanges like Binance and Huobi suggest that its movement could directly influence broader crypto market dynamics.
Is Tether Trustworthy?
Despite mounting controversies, Tether remains a cornerstone of the digital asset ecosystem, facilitating over 70% of Bitcoin trading volume. But as regulatory scrutiny intensifies and competitors like USDC and DAI grow in transparency, the long-term dominance of Tether may be challenged.