Tether (USDT)

Tether (USDT) is a prominent stablecoin designed to maintain a value pegged to the U.S. dollar, issued by Tether Holdings Ltd. Since its inception in 2014, USDT has become a crucial component of the cryptocurrency ecosystem, providing liquidity and stability in digital asset trading^[8]. Tether claims that each USDT token is backed by reserves, which as of 31 March 2026, included approximately $141 billion in U.S. Treasury exposure, $20 billion in gold, and $7 billion in bitcoin^[1]. The company has reported excess reserves of $8.23 billion, indicating that its assets exceed its liabilities^[1].

USDT is widely used across various blockchains, with the majority of its supply circulating on Ethereum and Tron, which together account for roughly 90% of its distribution^[8]. Tether has faced significant regulatory scrutiny, including a $41 million penalty from the CFTC for misleading claims about its reserves and a settlement with the New York Attorney General over false statements regarding its dollar backing^[3][4]. Despite these challenges, Tether remains a dominant player in the stablecoin market, with ongoing discussions about its transparency and reserve practices.

Overview

Tether (USDT) is a prominent stablecoin designed to maintain a value pegged to the US dollar. It is issued by Tether International, S.A. de C.V., a company that relocated to El Salvador^[6]. USDT is primarily used to facilitate trading on cryptocurrency exchanges, offering a stable alternative to the volatile nature of other digital assets.

Reserve Composition and Financial Reporting

Tether's reserves are predominantly composed of U.S. Treasury bills, reflecting a strategy focused on liquidity and low-risk assets^[1]. As of 31 March 2026, Tether reported approximately $141 billion in U.S. Treasury exposure, alongside holdings in gold and bitcoin^[1]. This composition underscores Tether's emphasis on maintaining a robust and transparent reserve backing for its issued tokens.

Tether's financial reporting includes both quarterly attestations and an annual audit. The quarterly attestations, prepared by BDO, provide a point-in-time verification of the reserves backing USDT^[1]. In contrast, Tether completed its first full financial statement audit for the year ended 31 December 2025, conducted by KPMG US^[1]. This audit resulted in an unqualified opinion, affirming the accuracy and integrity of Tether's financial statements under AICPA standards^[12]. This distinction between attestations and audits is crucial, as they serve different purposes in financial reporting.

Regulatory and Legal Context

Tether has faced regulatory scrutiny over the years. In February 2021, Tether and its affiliated company Bitfinex reached an $18.5 million settlement with the New York Attorney General's office^[3]. The settlement addressed allegations that Tether misrepresented the backing of its stablecoin and concealed losses^[3]. Additionally, in October 2021, the Commodity Futures Trading Commission (CFTC) imposed a $41 million penalty on Tether for claims that its reserves fully backed USDT on only 27.6% of days in a 26-month sample^[4].

The regulatory landscape for stablecoins has evolved, with the GENIUS Act (P.L. 119-27) signed into law on 18 July 2025^[1]. This legislation establishes a federal framework for payment stablecoin issuers, requiring issuer approval, redemption disclosures, and periodic reserve reporting examined by registered public accounting firms^[6][7].

Blockchain Distribution

USDT is widely distributed across multiple blockchains, with a significant concentration on Tron and Ethereum, which together hold approximately 90% of the circulating supply^[8]. This distribution reflects the strategic positioning of USDT within the broader cryptocurrency ecosystem, leveraging the strengths of these blockchains for scalability and accessibility.

Discontinued Support

In a strategic move to align with community demands, Tether discontinued support for the Omni Layer, Kusama, and Bitcoin Cash SLP on 17 August 2023^[5]. This decision was driven by declining usage and the availability of USDT on more popular blockchains, ensuring efficient resource allocation and security.

Tether's ongoing developments and regulatory engagements highlight its role as a pivotal player in the stablecoin market, continually adapting to the evolving financial landscape.

History

Early Development and Launch

Tether (USDT) was launched in 2014, pioneering the stablecoin model by pegging its value to real-world currencies on a 1-to-1 basis^[8]. Initially, Tether was issued on the Omni Layer, a protocol built on top of Bitcoin. However, due to declining usage and the availability of USDT on other blockchains, Tether discontinued support for the Omni Layer on 17 August 2023, along with Kusama and Bitcoin Cash SLP^[5].

Regulatory Challenges

Tether has faced significant regulatory scrutiny over the years. In February 2021, the New York Attorney General (NYAG) reached an $18.5 million settlement with Tether and its affiliated company, Bitfinex^[3]. The settlement followed an investigation that found Tether had misrepresented the backing of its stablecoins, claiming they were fully backed by U.S. dollars at all times, which was not the case^[3]. Additionally, in October 2021, the Commodity Futures Trading Commission (CFTC) fined Tether $41 million, revealing that Tether's reserves fully backed USDT on only 27.6% of the days in a 26-month sample from 2016 to 2018^[4].

Financial Reporting and Audits

For many years, Tether's financial transparency was limited to quarterly attestations prepared by BDO, which confirmed the accuracy of Tether's reserves at specific points in time^[1]. However, in a significant development, Tether completed its inaugural financial statement audit for the year ended 31 December 2025^[1]. Conducted by KPMG US, the audit resulted in an unqualified opinion, marking a milestone in Tether's commitment to transparency and financial scrutiny^[12]. This audit is distinct from the ongoing quarterly attestations by BDO, which continue to provide point-in-time reserve confirmations^[1][12].

Reserve Composition and Issuance

Tether's reserves are primarily composed of U.S. Treasury bills, reflecting a strategic focus on highly liquid, low-risk assets^[1]. As of 31 March 2026, Tether reported approximately $141 billion in U.S. Treasury exposure, alongside holdings in gold and bitcoin^[1]. The issuance of USDT is now managed by Tether International, S.A. de C.V., following the company's relocation to El Salvador^[1].

Legislative Impact

The GENIUS Act, signed into law on 18 July 2025, introduced a federal framework for payment stablecoin issuers in the United States^[1]. It mandates issuer approval, redemption disclosures, and periodic reserve reporting examined by registered public accounting firms^[6][7]. This legislation has implications for Tether's operations and compliance in the U.S. market.

Blockchain Distribution

USDT's supply is heavily concentrated on the Tron and Ethereum blockchains, which together hold about 90% of the circulating supply^[8]. This distribution reflects the strategic decisions made by Tether to leverage the most active and scalable blockchain networks for its stablecoin issuance.

How USDT is issued and redeemed

Issuance Process

Tether (USDT) is issued by Tether International, S.A. de C.V., which is based in El Salvador^[6]. The issuance process begins when a verified customer deposits fiat currency into Tether's bank account. Once the deposit is confirmed, Tether mints an equivalent amount of USDT tokens and credits them to the customer's account^[8]. This process ensures that each USDT token is backed by an equivalent amount of fiat currency or other reserves, maintaining the stablecoin's peg to the US dollar.

Redemption Process

The redemption process for USDT involves the reverse of the issuance process. Verified customers can redeem their USDT tokens by sending them back to Tether. Upon receipt, Tether burns the tokens and transfers the equivalent amount of fiat currency back to the customer's bank account^[8]. This mechanism is designed to maintain the one-to-one peg of USDT to the US dollar.

Reserve Composition and Transparency

Tether's reserves are primarily composed of U.S. Treasury bills, which are considered highly liquid and low-risk assets^[1]. This composition is part of Tether's strategy to ensure liquidity and stability. Tether provides transparency through quarterly attestations prepared by BDO, a global accounting firm^[1]. These attestations confirm the accuracy of Tether's financial figures and reserves at specific points in time. Additionally, Tether completed its first full financial statement audit for the year ended 31 December 2025, conducted by KPMG US, which issued an unqualified opinion^[12]. This audit represents a significant step in Tether's commitment to transparency and financial scrutiny.

Blockchain Distribution

USDT is available on multiple blockchain platforms, with the majority of its supply concentrated on Tron and Ethereum, which together account for approximately 90% of the total USDT in circulation^[8]. This distribution allows for flexibility and accessibility across different blockchain ecosystems. However, Tether discontinued support for the Omni Layer, Kusama, and Bitcoin Cash SLP on 17 August 2023, due to declining usage and community interest^[5].

Regulatory Compliance

Tether operates under various regulatory frameworks, including the GENIUS Act, which was signed into law on 18 July 2025^[1]. This act requires payment stablecoin issuers to obtain approval, disclose redemption processes, and provide periodic reserve reporting examined by registered public accounting firms^[6][7]. Tether's compliance with these regulations is part of its broader effort to maintain trust and reliability in the stablecoin market.

Comparison with Other Stablecoins

Stablecoin	Issuer	Reserve Composition	Attestation/Audit
USDT	Tether	Predominantly U.S. Treasury bills	Quarterly attestations by BDO; annual audit by KPMG US[1][12]
USDC	Circle	U.S. Treasuries and cash equivalents	Regular attestations[10]

This table highlights the reserve composition and transparency practices of USDT compared to USDC, another major stablecoin. Both stablecoins emphasize transparency and regulatory compliance, though their reserve compositions and attestation practices differ.

Reserves and attestations

Tether's reserves and financial reporting practices have evolved significantly over the years, with a focus on transparency and compliance with regulatory standards. The reserves backing Tether (USDT) are primarily composed of U.S. Treasury bills, reflecting a strategy centered on liquidity and low-risk assets^[1]. As of 31 March 2026, Tether's reserves included approximately $141 billion in U.S. Treasury exposure, $20 billion in physical gold, and $7 billion in Bitcoin^[1].

Quarterly Attestations

Tether engages BDO, a top-five global independent accounting firm, to prepare quarterly attestations of its reserves. These attestations confirm the accuracy of Tether's financial figures and reserves as of specific dates. For instance, the attestation for the first quarter of 2026 reported total assets of approximately $191.77 billion and liabilities of $183.54 billion, resulting in excess reserves of $8.23 billion^[1]. These attestations are distinct from full financial audits, focusing on verifying that the figures provided by management align with the records on the attestation date^[1].

Annual Financial Statement Audit

In a significant development, Tether completed its inaugural financial statement audit for the year ended 31 December 2025^[1]. Conducted by KPMG US, the audit resulted in an unqualified opinion, indicating that the financial statements present a fair and accurate view of the company's financial position in accordance with U.S. generally accepted accounting principles (GAAP)^[12]. This audit represents a milestone in Tether's commitment to transparency and sets a new standard for financial scrutiny in the stablecoin market^[12].

Regulatory and Compliance Context

Tether's financial practices have been subject to regulatory scrutiny. In February 2021, Tether and its associated entities settled with the New York Attorney General for $18.5 million, following findings that Tether had overstated its reserves^[3]. Additionally, in October 2021, the Commodity Futures Trading Commission (CFTC) fined Tether $41 million, noting that USDT was fully backed by reserves on only 27.6% of days in a 26-month sample period from 2016 to 2018^[4].

Comparison with Other Stablecoins

Stablecoin	Reserve Composition	Attestation/Audit Firm	Reporting Cadence
USDT	U.S. Treasuries, Gold, Bitcoin	BDO (attestations), KPMG (audit)	Quarterly (attestations), Annual (audit)
USDC	U.S. Treasuries, Bank Deposits	Not specified in sources	Not specified in sources[10]

Tether's approach to reserves and financial reporting reflects its role as a major player in the stablecoin market, with a focus on maintaining liquidity and transparency. The completion of a full financial statement audit marks a significant step in aligning with industry standards and regulatory expectations.

Supported blockchains

Tether (USDT) is a widely used stablecoin that operates on multiple blockchain platforms, providing flexibility and accessibility to users across various ecosystems. As of October 2026, the distribution of USDT is heavily concentrated on two major blockchains: Tron and Ethereum, which together account for approximately 90% of the total USDT supply^[8].

Ethereum and Tron

Ethereum and Tron are the primary blockchains supporting USDT, with the majority of the token's supply residing on these platforms^[8]. Ethereum, known for its robust smart contract capabilities, has been a longstanding host for USDT, facilitating a wide range of decentralized applications and financial services. Tron, on the other hand, offers high transaction speeds and low fees, making it an attractive option for users seeking efficient and cost-effective transactions.

Other Supported Blockchains

In addition to Ethereum and Tron, USDT is available on several other blockchains, each offering unique features and benefits:

• Solana: Known for its high throughput and low transaction costs, Solana provides a scalable environment for USDT transactions, catering to users who require fast and inexpensive transfers.
• Algorand: With its focus on security and decentralization, Algorand supports USDT, offering a reliable platform for stablecoin transactions.
• Polygon: As a layer-2 scaling solution for Ethereum, Polygon enhances transaction speeds and reduces costs, making it a popular choice for USDT users seeking improved efficiency.
• Avalanche: This blockchain is designed for high performance and scalability, supporting USDT transactions with quick finality and low fees.

Discontinued Support

Tether has periodically reassessed its blockchain support strategy to align with community interest and technological advancements. On 17 August 2023, Tether discontinued support for USDT on the Omni Layer, Kusama, and Bitcoin Cash SLP^[5]. The decision was driven by declining usage and the availability of USDT on more widely adopted blockchains^[5]. Users of these discontinued platforms were provided a 12-month window to redeem or swap their tokens^[5].

Comparison with Other Stablecoins

While USDT remains a dominant player in the stablecoin market, it is important to note the regulatory and operational frameworks that distinguish it from other stablecoins. For instance, the GENIUS Act, enacted in July 2025, imposes specific requirements on payment stablecoin issuers, including issuer approval, redemption disclosures, and periodic reserve reporting^[6][7]. These regulations aim to enhance transparency and stability within the stablecoin sector.

In comparison, USDC, another major stablecoin, is backed by reserves held in highly liquid fiat assets, with regular attestations provided by independent accounting firms^[10]. This contrasts with USDT's reserve composition, which is predominantly in U.S. Treasury bills^[1].

Overall, Tether's strategic choice of blockchains and compliance with evolving regulatory standards underscore its commitment to maintaining a robust and adaptable stablecoin ecosystem.

Regulatory history and enforcement

New York Attorney General Settlement

In February 2021, Tether and its affiliated company Bitfinex reached a settlement with the New York Attorney General (NYAG) following an investigation into their activities^[1]. The NYAG found that Tether had misrepresented the backing of its stablecoin, USDT, claiming it was fully backed by U.S. dollars at all times, which was not the case^[3]. The settlement required Tether and Bitfinex to pay an $18.5 million penalty and prohibited them from conducting business with New York residents^[3]. Additionally, they were mandated to provide quarterly transparency reports^[3].

Commodity Futures Trading Commission Order

In October 2021, the Commodity Futures Trading Commission (CFTC) imposed a $41 million fine on Tether for making misleading statements about its reserves^[1]. The CFTC found that Tether's reserves fully backed USDT on only 27.6% of the days in a 26-month period from 2016 to 2018^[4]. The order highlighted the presence of undisclosed non-fiat assets and unsecured receivables in Tether's reserves^[4].

Financial Audits and Attestations

Tether's financial transparency has evolved over the years. Historically, Tether relied on quarterly attestations conducted by BDO, which confirmed the accuracy of its financial figures and reserves at specific points in time^[1]. However, in a significant development, Tether completed its first full financial statement audit for the year ended 31 December 2025^[1]. This audit was conducted by KPMG US, which issued an unqualified opinion, indicating that Tether's financial statements were presented fairly and in accordance with U.S. generally accepted accounting principles^[12]. This audit is distinct from the ongoing quarterly attestations by BDO^[12].

GENIUS Act Compliance

The GENIUS Act, signed into law on 18 July 2025, established a federal framework for payment stablecoin issuers, requiring them to obtain approval, disclose redemption processes, and provide periodic reserve reports examined by registered public accounting firms^[6][7]. Tether, as a major stablecoin issuer, is subject to these regulations, which aim to enhance transparency and consumer protection in the stablecoin market.

Reserve Composition and Regulatory Position

Tether's reserves are predominantly composed of U.S. Treasury bills, rather than holding fiat currencies like dollars, euros, or yen in bank accounts^[1]. This reserve strategy positions Tether as one of the largest holders of U.S. Treasuries globally^[1]. In the European Economic Area, Tether must comply with the EU's Markets in Crypto-Assets (MiCA) regulation, which sets requirements for e-money tokens^[9].

Discontinued Support for Omni Layer

On 17 August 2023, Tether discontinued support for USDT issuance on the Omni Layer, along with Kusama and Bitcoin Cash SLP^[5]. This decision was part of a strategic transition to focus on blockchains with higher community interest and usage^[5].

Depeg events

Historical Context

Tether (USDT) has faced scrutiny and regulatory challenges over its reserve backing and peg stability. The New York Attorney General's (NYAG) investigation in February 2021 revealed that Tether's claims of one-to-one backing with U.S. dollars were misleading^[3]. This investigation led to an $18.5 million settlement and imposed transparency requirements on Tether, including quarterly reporting^[3]. Additionally, the Commodity Futures Trading Commission (CFTC) found that Tether's reserves fully backed USDT on only 27.6% of days in a 26-month period from 2016 to 2018, resulting in a $41 million penalty^[4].

Documented Depeg Episodes

Despite these regulatory findings, specific instances of USDT depegging are not extensively documented in the available sources. Tether has consistently maintained that its tokens are backed by reserves, primarily consisting of U.S. Treasury bills, gold, and bitcoin^[1]. The company has also emphasized its commitment to transparency through regular attestations by BDO and, more recently, a full financial statement audit by KPMG^[1][12].

Comparison with Other Stablecoins

While Tether's depeg events are not comprehensively detailed in the sources, it is useful to compare its reserve practices with those of other stablecoins, such as USDC. Circle, the issuer of USDC, provides regular attestations of its reserves, which are fully backed by fiat currency and held in highly liquid assets^[10]. This comparison highlights the different approaches to reserve management and transparency within the stablecoin market.

Stablecoin	Reserve Composition	Attestation/Audit Firm	Frequency
USDT	U.S. Treasuries, gold, bitcoin[1]	BDO (attestations), KPMG (audit)[1][12]	Quarterly (attestations), Annual (audit)
USDC	Fiat currency, highly liquid assets[10]	Not specified in sources	Regular attestations[10]

Regulatory Impact

The GENIUS Act, signed into law on 18 July 2025, establishes a federal framework for payment stablecoin issuers, requiring issuer approval, redemption disclosures, and periodic reserve reporting examined by registered public accounting firms^[6][7]. This legislation aims to enhance the transparency and stability of stablecoins, including USDT, by imposing stricter regulatory standards.

Conclusion

While specific depeg episodes of USDT are not detailed in the sources, Tether's regulatory history and reserve management practices have been subject to significant scrutiny. The company's recent audit by KPMG and ongoing attestations by BDO reflect its efforts to address transparency concerns and comply with evolving regulatory requirements. As the stablecoin market continues to develop, the impact of regulatory frameworks like the GENIUS Act will likely play a crucial role in shaping the industry's future.

Criticism and open questions

Transparency and Audit Practices

Tether's transparency and audit practices have been a focal point of criticism and scrutiny. Historically, Tether faced criticism for not providing a full audit of its reserves, relying instead on quarterly attestations by BDO, a global accounting firm^[1]. These attestations confirm the accuracy of Tether's financial figures at a specific point in time but do not provide the comprehensive financial scrutiny of an audit. However, in a significant development, Tether completed its first full financial statement audit for the year ended 31 December 2025, conducted by KPMG US, which issued an unqualified opinion^[12]. This audit represents a milestone in Tether's transparency efforts, distinguishing it from the quarterly attestations that continue to be prepared by BDO^[1][12].

Reserve Composition and Backing

Questions about the composition and backing of Tether's reserves have persisted. The New York Attorney General's 2021 investigation found that Tether's claims of one-to-one dollar backing were misleading, leading to an $18.5 million settlement^[3]. Additionally, the CFTC found that Tether's reserves fully backed USDT on only 27.6% of days in a 26-month sample from 2016 to 2018^[4]. As of 31 March 2026, Tether's reserves are primarily composed of U.S. Treasury bills, with significant holdings in gold and bitcoin^[1]. This composition reflects a shift from earlier claims of fiat currency backing, yet questions about the transparency and liquidity of these assets remain.

Regulatory Compliance and Legal Challenges

Tether has faced multiple regulatory challenges, including settlements with the New York Attorney General and the CFTC^[3][4]. The GENIUS Act, signed into law in July 2025, imposes new requirements on payment stablecoin issuers, including issuer approval, redemption disclosure, and periodic reserve reporting examined by registered public accounting firms^[6][7]. Tether's compliance with these evolving regulatory frameworks remains a critical area of interest, particularly given its past legal challenges.

Market Dominance and Blockchain Support

Tether's market dominance, particularly on the Tron and Ethereum blockchains, which together hold about 90% of USDT, raises questions about centralization and systemic risk^[8]. The discontinuation of USDT issuance on the Omni Layer, Kusama, and Bitcoin Cash SLP in August 2023 reflects Tether's strategic focus on more widely adopted blockchains^[5]. This concentration could pose risks if issues arise on these platforms, potentially affecting the broader cryptocurrency market.

Comparison with Other Stablecoins

Stablecoin	Issuer	Reserve Composition	Audit/Attestation
USDT	Tether	U.S. Treasuries, gold, bitcoin[1]	Quarterly attestations by BDO[1], annual audit by KPMG[12]
USDC	Circle	Fiat reserves, Treasuries[10]	Regular attestations (firm not specified)

Tether's practices are often compared to those of other stablecoins, such as USDC, which also provides regular attestations of its reserves^[10]. The differences in reserve composition and audit practices highlight ongoing debates about transparency and risk management in the stablecoin sector.

Comparison with other stablecoins

Stablecoins, such as Tether (USDT), are digital currencies designed to maintain a stable value relative to a fiat currency, typically the US dollar. This section compares USDT with other prominent stablecoins, focusing on reserve composition, regulatory compliance, and market presence.

Reserve Composition

Tether's reserves are predominantly composed of U.S. Treasury bills, with significant holdings in gold and bitcoin^[1]. This contrasts with other stablecoins like USDC, issued by Circle, which is backed by a combination of cash and short-term U.S. government securities^[10]. The reserve composition is crucial for maintaining the stability and trustworthiness of a stablecoin, as it determines the issuer's ability to redeem tokens at par value.

Stablecoin	Primary Reserve Assets	Attestation/Audit Firm	Frequency of Reporting
USDT	U.S. Treasury bills, gold, bitcoin	BDO (attestations), KPMG (audit)	Quarterly (attestations), Annually (audit)
USDC	Cash, short-term U.S. government securities	Not specified in sources	Not specified in sources

Regulatory Compliance

The regulatory landscape for stablecoins has evolved significantly, with the introduction of the GENIUS Act in the United States, which mandates issuer approval, redemption disclosure, and periodic reserve reporting^[6][7]. Tether has faced regulatory scrutiny in the past, including a settlement with the New York Attorney General in 2021 for $18.5 million and a $41 million penalty from the CFTC for misrepresenting its reserves^[3][4]. These actions have led to increased transparency and compliance measures by Tether, including the publication of its first full financial statement audit by KPMG for the year ended 31 December 2025^[12].

In contrast, USDC has positioned itself as a compliant stablecoin, adhering to regulatory standards and maintaining transparency through regular reserve disclosures^[10]. The GENIUS Act further reinforces the need for stablecoin issuers to comply with stringent regulatory requirements, ensuring consumer protection and financial stability.

Market Presence

USDT is the most widely used stablecoin, with a significant portion of its supply concentrated on the Tron and Ethereum blockchains, which together hold about 90% of USDT^[8]. This widespread adoption underscores its role as a major player in the digital asset market, facilitating transactions across various platforms and exchanges.

USDC, while also popular, has a smaller market share compared to USDT. It is often favored for its regulatory compliance and transparency, appealing to users and institutions seeking a stablecoin with a strong compliance framework^[10].

Historical Context

Historically, Tether has faced challenges related to its reserve transparency and regulatory compliance. The CFTC found that Tether's reserves fully backed USDT on only 27.6% of days in a 26-month sample from 2016 to 2018^[4]. However, Tether has since taken steps to improve its transparency and compliance, including the aforementioned audit by KPMG^[12].

In contrast, BUSD, issued by Paxos, was once a competitor but ceased issuance in February 2023 following regulatory directives^[11]. This highlights the dynamic nature of the stablecoin market and the impact of regulatory actions on stablecoin issuers.

Overall, while USDT remains a dominant force in the stablecoin market, its competitors like USDC continue to challenge its position by emphasizing regulatory compliance and transparency.