What Is USDT (Tether)? A Plain-English Guide

USDT — better known as Tether — is the largest stablecoin in the world, designed to hold a steady value of one US dollar. It's the currency most crypto trading actually happens in. This guide explains what USDT is, how it tries to stay at $1, who runs it, and the long-running debates you should understand before you use it.

What is USDT?

USDT is a stablecoin: a crypto token engineered to track the price of a real-world asset — in this case, the US dollar. One USDT is meant to always be worth roughly $1, so it doesn't swing in value the way Bitcoin or Ethereum do.

It's issued by Tether Limited, a private company. When someone deposits dollars with Tether, the company issues new USDT; when tokens are redeemed, they're taken out of circulation. USDT runs on many blockchains, including Ethereum and Tron, so the same dollar-pegged token can move across different networks.

By market size, USDT is consistently the biggest stablecoin and one of the most-traded crypto assets of any kind. A large share of all crypto trades are priced in USDT rather than in actual dollars.

How USDT stays near $1

USDT is a fiat-collateralised stablecoin. The core promise is simple: every token in circulation is backed by reserves Tether holds — cash, short-term US government debt and similar assets — so that USDT can be redeemed for dollars at roughly 1:1.

• Backing — Tether publishes regular attestations describing what its reserves contain.
• Redemption — eligible customers can redeem USDT for dollars directly with Tether, which keeps the market price anchored.
• Arbitrage — if USDT trades below $1, traders can buy it cheaply and redeem it for a full dollar, pushing the price back up.

Why people use USDT

USDT exists to solve a practical problem: moving in and out of a stable dollar value without leaving the crypto system or waiting on a bank.

• Trading — traders park funds in USDT between trades to avoid volatility, then move back into other coins.
• Moving money — USDT can be sent across borders in minutes, any time of day.
• Access to dollars — in some countries with unstable local currencies, people use USDT as a way to hold something dollar-like.

USDT is also the main settlement asset across much of DeFi and centralised exchanges alike, which is a big part of why it's so widely held.

The reserves debate

USDT has long faced scrutiny over whether its reserves are genuinely sufficient. Tether publishes attestations — reports from an accounting firm describing reserves at a point in time — rather than a full financial audit, and critics argue that's a weaker standard of proof.

In 2021, Tether settled with the New York Attorney General over claims it had misrepresented the backing of USDT during an earlier period; the company paid $18.5 million to settle, without admitting or denying the allegations, while agreeing to publish reserve breakdowns. Separately, it paid a separate $41 million penalty to the US Commodity Futures Trading Commission the same year. Tether has since said its reserves are heavily weighted toward US Treasury bills and reports large profits from them.

It's fair to say USDT works as intended in practice and is enormously widely used — and also fair to say it has attracted more transparency questions than some rivals. Both things are true, and a balanced user holds both in mind.

Risks to understand

USDT isn't volatile the way most crypto is, but it carries its own distinct risks — covered in depth in our stablecoin risks guide.

• Issuer risk — you're trusting a private company to hold real reserves and honour redemptions.
• Depeg risk — under stress, USDT can briefly trade below $1 on the open market.
• Regulatory risk — stablecoin rules are tightening worldwide and could affect how USDT operates.
• It earns you nothing by default — holding USDT is not the same as a bank deposit, and there's no deposit insurance behind it.

Frequently asked questions