One of the biggest problems in crypto trading has always been the difficulty of moving between crypto and fiat currency. Every time a trader wanted to take profits by converting to dollars, they had to either sell on an exchange that supported fiat (limited options, lots of regulation) or hold their gains in something volatile like Bitcoin. In 2014, a company called Tether proposed a solution: a cryptocurrency pegged 1:1 to the U.S. dollar.
Tether (USDT) worked by claiming that for every token issued, the company held one dollar in its bank accounts as reserve. If you wanted to “sell” crypto for dollars, you could just trade your Bitcoin for USDT. The price would stay at $1.00 because the reserves backed it. You could hold USDT as cash, trade it on multiple exchanges, move it between wallets — all without dealing with banks.
The appeal was immediate. Traders loved having a stable asset they could trade in and out of. Exchanges loved having a dollar-like token that didn’t require banking relationships. USDT became one of the most traded cryptocurrencies in the world, often surpassing even Bitcoin in daily volume. By 2024, more than $100 billion worth of USDT was in circulation.
But Tether has been shrouded in controversy for years. Critics questioned whether the company actually held enough dollars to back all the USDT in circulation. Audits were promised and delayed. The company had shifting explanations of what backed the reserves — sometimes dollars, sometimes “cash equivalents,” sometimes loans and commercial paper. In 2021, the New York Attorney General fined Tether $18.5 million for misrepresenting its reserves. Skeptics argued that Tether could collapse at any moment, potentially taking down the entire crypto market with it.
Despite the controversies, Tether has not collapsed. It remains the most widely used stablecoin in crypto. Its competitors — USDC from Circle, BUSD from Binance, DAI from MakerDAO — have taken market share but never fully displaced it. Tether’s existence has been crucial to crypto’s development. Without a reliable way to hold “dollars” on-chain, DeFi couldn’t exist. Trading would be much harder. The crypto economy would look very different. Whatever you think of Tether’s practices, its impact on the industry is undeniable.
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