For instance, when the exchange FTX collapsed in November 2022, Tether plummeted to nearly $0.995 but rebounded quickly, at times seeing much more than a 1-to-1 peg through January 2023. USDT coins can be cashed out at any exchange that supports a pair with both USDT and your local currency. Tether Limited will process redemptions from their dollar reserves but only for corporate clients that meet specific criteria and refund their cash equivalent in their chosen fiat currency. Being an asset-backed cryptocurrency stablecoin has made USDT a safe haven asset for poor market conditions.

The system of Tether is antithetical to that of Bitcoin and as a result, many crypto enthusiasts are naturally skeptical of Tether. This justified skepticism creates an audience that is receptive to hearing about allegations of fraud. Tether works completely with government regulations and restrictions, and prohibits transactions from persons and entities connected to certain high-risk jurisdictions. Tether and BitFinex were accused of borrowing at least $700 million from Tether’s reserves to cover BitFinex’s losses, leading to a court order enjoining the companies from further violations of New York law. Tether faced a significant security breach in which $31 million worth of USDT tokens were stolen.

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To the extent any recommendations or statements of opinion or fact made in a story may constitute financial advice, they constitute general information and not personal financial advice in any form. As such, any recommendations or statements do not take into account the financial circumstances, investment objectives, tax implications, or any specific requirements of readers. To answer these concerns, Tether commits itself to transparency, having implemented an accessible Proof-of-Reserves mechanism. It also provides information about locked and on-chain USDT tied to blockchain bridges. In the moment it de-pegged, there was an imbalance in Curve’s 3pool, a liquidity pool supporting USDT.

NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance. In a nutshell, Tether is meant to work as follows; whenever a user deposits a US dollar to Tether’s account, Tether Inc—the company behind Tether the stablecoin—mints one Tether in return.

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Tether trading pairs are a common way to denominate prices in fiat currency, which most people can more readily understand. As many exchanges find it impossible to set up a fiat bank account, some have resorted to holding their funds in Tether tokens. Stablecoins are pegged to a stable asset such as gold, the US dollar, or another fiat currency.

• Although the presence of many different stablecoins is huge, none of them has come close to challenging its value.
• “It has a very questionable legal past, and to this day, its actual reserves are still quite opaque and believed to be substantially composed of unknown sources of commercial paper,” Carlton says.
• Typically these are offered by centralized exchanges, and essentially all they do is allow you to buy or sell cryptocurrencies for fiat currencies such as euros or dollars.
• As a result, Tether is the most popular digital currency for trading between cryptocurrencies with the most pairings compared to other stablecoins.
• NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor.
• As a stablecoin, it provides stability and predictability not often found in the crypto world.

An official report found no publicly auditable records show any new token issuance as of August 2018. In 2021, the US Attorney General reached a settlement with Tether and Bitfinex to pay $42.5 million; however, https://www.tokenexus.com/what-is-a-tether-and-how-does-it-work/ Tether Limited and Bitfinex did not admit the allegations despite paying the fine. For these reasons, investors have turned to alternative stablecoins to Tether such as USD Coin and Binance USD.

What Is Tether (USDT), the Token With the Record $83.6 Billion Market Cap

As far-fetched as it sounds, victims routinely lose hundreds of thousands or even millions of dollars. One Kansas banker was charged this month with embezzling $47.1 million from his bank as part of a pig-butchering scam. In conclusion, as you can see there are a wide range of blockchain platforms that support this stablecoin and each have their own unique set of characteristics. Going through Tether on different blockchains can give you an insight of how much this stablecoin has really grown in the past years and shows how much room it has to grow and evolve in the years to come. Tezos is a blockchain platform with many perks, such as, high-scalability, smart contract functionality and Dapp development.

• Tether’s other source of revenue is the interest income it earns from lending its reserves to third parties.
• The circulation of Tether is approaching 1 billion tokens, and more and more are being created as more and more funds reportedly flow into the Tether reserve accounts.
• To date, nothing in investing or cryptocurrencies is guaranteed, including, stablecoins.
• When Tether EOS smart contract was developed, it was then sent to the “tethertether” account on EOS, where after that it was peer-reviewed by EOS Canada.
• You should always check with the product provider to ensure that information provided is the most up to date.
• By then, the company was already dealing with critics questioning the adequacy of its reserves and, as subsequent investigations would show, having trouble accessing banking services.
• Most traditional cryptocurrencies like Ethereum  and Litecoin (LTC) will see extreme fluctuations and volatility with the market, inflation and interest rates.

In 2017, the Omni foundation and Charlie Lee announced that Tether would issue on the Omni layer of Litecoin. In 2017, Tether announced they would be launching ERC-20 tokens for United States Dollars and Euros on the Ethereum blockchain. Willett publishing a paper in 2012 stating the possibility of new currencies on top of the Bitcoin protocol. Craig Sellars, CTO of Mastercoin, would also become one of the co-founders of Tether. USDT is also used for remittances, allowing users to send and receive funds across borders quickly and at a lower cost than traditional methods. Its stable value ensures that the recipient receives the correct amount of funds without worrying about currency fluctuations.