In short
- USDT is a stablecoin issued by Tether, designed to be redeemable for one US dollar.
- Its value depends on the reserves Tether holds and on Tether's ability to honour redemptions.
- USDT exists on several blockchains; the same token on Tron (TRC20) and Ethereum (ERC20) cannot be sent across networks directly.
- It is not a bank deposit: there is no deposit insurance, and Tether can freeze tokens.
What USDT is
USDT, also called Tether, is a stablecoin: a crypto token built to hold a steady value of one US dollar. It is issued by the company Tether, which launched it in 2014. When approved customers send Tether dollars, it issues new USDT; when they redeem USDT, it sends dollars back and removes the tokens from circulation. That redemption promise is what keeps the market price close to $1.
USDT is the largest stablecoin by market value, with well over $100 billion in circulation according to Tether's own published figures. It is used far more for moving money inside the crypto market than for everyday payments.
What backs it
Tether says every USDT is backed by reserves, which it reports mostly consist of short-term US Treasury bills, along with other assets such as cash equivalents, secured loans, gold and bitcoin. It publishes quarterly attestation reports from an accounting firm. An attestation checks the reserves at a point in time; it is narrower than a full audit.
Tether's reserve claims have been challenged in the past. In 2021, the US Commodity Futures Trading Commission fined Tether $41 million for misleading statements about its reserves, and the New York Attorney General reached an $18.5 million settlement with Tether and its sister exchange Bitfinex. The company's disclosures have become more detailed since, but holders are still relying on a private company.
Why people use USDT
- Trading: most crypto exchanges quote prices against USDT, so traders hold it between trades.
- Moving value: USDT can be sent around the world in minutes, at any hour.
- Dollar exposure: in countries with unstable currencies, some people hold USDT as a way to hold dollars.
TRC20, ERC20 and other networks
USDT is issued on several blockchains. The two most used are Tron (the token standard is called TRC20) and Ethereum (ERC20). It also exists on other networks. The token is worth the same on each, but the networks are separate systems.
| TRC20 (Tron) | ERC20 (Ethereum) | |
|---|---|---|
| Address format | Starts with T | Starts with 0x |
| Fees paid in | TRX (network resources) | ETH (gas) |
| Typical use | Low-cost transfers between exchanges | Decentralised finance apps and wallets on Ethereum |
The risks
- Issuer risk: the peg depends on Tether holding enough good-quality reserves and honouring redemptions. USDT has briefly traded below $1 during market stress, for example in May 2022.
- Freezing: Tether can freeze USDT at specific addresses, which it does at the request of law enforcement. This helps fight crime but means your balance is not fully in your control.
- Regulation: stablecoin rules are changing. Under the EU's crypto regulation (MiCA), several exchanges restricted USDT trading for European users.
- No deposit protection: USDT held on an exchange or in a wallet is not covered by bank deposit insurance.
- Scams: many investment scams ask victims to pay in USDT because transfers are fast and hard to reverse. See how to spot trading scams.
USDT compared with other stablecoins
USDC, issued by Circle, is the second-largest dollar stablecoin and is regulated differently. Other stablecoins use crypto collateral or algorithms rather than cash reserves; the collapse of the algorithmic stablecoin TerraUSD in May 2022 showed how fragile some designs can be. No stablecoin is risk-free, and their differences are worth understanding before holding large amounts.
Frequently asked questions
Is USDT the same as a US dollar?
No. USDT is a token issued by a private company that aims to be redeemable for one dollar. Its value depends on Tether's reserves and on its ability to honour redemptions, and it is not covered by deposit insurance.
Which is better, TRC20 or ERC20 USDT?
Neither is better in value; they are the same token on different blockchains. TRC20 transfers are usually cheaper, while ERC20 is widely supported in Ethereum-based apps. What matters most is using the network the recipient supports.
Can USDT lose its peg?
Yes. It has traded below $1 during periods of stress, usually briefly. A lasting loss of the peg would require doubts about Tether's reserves or its ability to redeem.
Sources
- Tether transparency page
- CFTC press release on Tether settlement (2021)