Tether, USDT Stablecoins: Why Regulators Are Worried

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USDT, the stablecoin issued by Tether Holdings Ltd., is not the most valuable cryptocurrency or the most likely to get you rich. Tether simply promises that if you give it $1, it will give you a coin which will almost always be worth $1. This annoying utility has made it the most traded digital token in crypto. It has also become a matter of concern following the collapse of the FTX stock exchange, the ripple effects of which continue to reverberate throughout the industry. If USDT stumbles, the risk of broader turmoil in already struggling crypto markets could increase significantly.

It is a stablecoin, a class of crypto-asset that is designed to always be worth a fixed value, usually $1. This is in contrast to most cryptocurrencies, which can experience large fluctuations. Most stablecoins maintain their peg by promising to hold an equivalent value of funds in reserve as collateral to match the coins being sold. For fiat-backed stablecoins like USDT, the majority of this collateral stack is typically held in the form of a mix of cash and highly liquid cash equivalents.

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