What is Tether?

Tether (USDT) is the largest stablecoin by market capitalization, designed to maintain a 1:1 peg to the US dollar. It operates across multiple blockchains — most prominently Ethereum (ERC-20) and Tron (TRC-20) — and functions as the primary unit of account and liquidity layer across most centralized and decentralized crypto exchanges. Tether's persistent controversy centers on the composition and verifiability of its reserves: the company has been fined by regulators and has historically declined full independent audits, publishing quarterly 'attestations' instead.

Tether's peg mechanism is centralized: Tether Limited issues and redeems USDT against dollar deposits held in its treasury, meaning the stablecoin's stability is entirely dependent on the issuer's solvency and willingness to honor redemptions. This is a fundamentally different model from algorithmic stablecoins (which use on-chain mechanisms) or MakerDAO's DAI (which is over-collateralized by on-chain assets). The practical consequence is that USDT is the most liquid stablecoin in the world — with daily trading volumes that often exceed Bitcoin's — but also the one where counterparty risk is most concentrated in a single offshore company.

The core, durable risk with Tether is reserve opacity. A 2021 settlement with the New York Attorney General found that Tether had misrepresented that USDT was always fully backed by US dollars; a portion of reserves had been placed in commercial paper, affiliated loans, and other non-cash assets. Tether has since moved reserves toward US Treasury Bills, which are disclosed in quarterly reports, but these reports are attestations (a limited agreed-upon procedures engagement) rather than full financial audits. A de-peg event — even a temporary one — would have cascading effects across crypto markets given USDT's role as the dominant trading pair.

Reviewed by the 2Bitcoins Editorial Team · Updated June 2026. Not financial advice.