What is the cryptocurrency Tether (USDT)? Explaining the advantages and disadvantages and future trends

Tether (USDT) is the most traded stablecoin in the cryptocurrency market. A stablecoin is a cryptocurrency that aims to link its value to fiat currency or other assets. USDT in particular has price stability linked to the US dollar, making it widely used on exchanges and in DeFi (decentralized finance).

This article will explain in detail the characteristics, advantages and disadvantages, and latest trends of Tether.

Current price: 150.96 yen

As of March 25, 2025 (CoinMarketCap "Tether (USDT) Price, Chart, Market Cap")

The price of USDT is always aimed at 1 USDT = 1 dollar, but in reality, there may be slight price fluctuations due to market supply and demand. For example, during sudden market fluctuations, the price of USDT may go below or above 1 dollar.

USDT is used as a trading pair on many exchanges and is also characterized by its high liquidity. This is evidence that investors view it as a safe asset that allows them to trade with confidence.

How Tether (USDT) works

USDT is a type of stablecoin, and is operated with the aim of 1USDT = 1 dollar. It was issued by Tether, and is secured by fiat currency (mainly dollars), ensuring price stability.

Tether has promised to hold fiat currency or equivalents of equal value as reserve assets for the USDT it issues.

Tether regularly audits its reserve assets to ensure transparency, but in the past, its transparency has been called into question.

Stablecoins as defined by Japanese law are regarded as electronic payment methods under the Payment Services Act, and strictly speaking, are treated differently from stablecoins as they are expressed overseas.

Uses and market role of USDT 

USDT is often used as the base currency for cryptocurrency transactions, and acts as a bridge between fiat currencies and cryptocurrencies. In particular, USDT-denominated trading pairs are the mainstream for buying and selling cryptocurrencies around the world. Investors protect their assets by exchanging Bitcoin (BTC) and Ethereum (ETH) for USDT when the price is likely to fall.

USDT is also used as a means of remittance, allowing for low-cost and fast international remittances. This makes it easier to send money, especially to family and friends overseas, and can significantly reduce costs compared to traditional bank transfers.

Comparison with other stable coins (USDC/DAI)

USDT is unique compared to other stablecoins. For example, while USD Coin (USDC) is considered to be highly reliable, it is sometimes inferior to USDT in terms of liquidity. USDC is issued in compliance with US regulations and is characterized by its high transparency.

DAI is also a crypto-asset-backed stablecoin and has a different mechanism from the centralized USDT. DAI is issued using Ethereum and ERC20-compliant crypto assets as collateral, so it employs complex mechanisms to maintain price stability.

Price stability 

USDT is pegged to the US dollar, so it has the advantage of being less volatile than other cryptocurrencies and easier to manage risk. In particular, USDT is very effective as a means of avoiding fluctuation risks such as Bitcoin. Investors can protect the value of their assets by exchanging their assets for USDT when the market fluctuates rapidly.

Price stability is important, especially in volatile market environments. By using USDT, investors can safely store their assets and reinvest in other virtual currencies as needed.

Convenience of cryptocurrency trading

USDT is highly valued in cryptocurrency trading. USDT-denominated pairs are the norm at overseas cryptocurrency exchanges, and trading liquidity is extremely high.

In addition, USDT is supported by many overseas cryptocurrency exchanges, so investors can easily purchase USDT or exchange it for other cryptocurrencies. This convenience is a huge attraction for investors.

Low fees and speed

Transfers using USDT are cheaper and faster than bank transfers. In particular, because it can be used on different networks such as ERC20, TRC20, and SPL, transfer fees can be kept low. This can significantly reduce the cost of making international transfers.

For example, by using the TRC20 network, quick transfers can be achieved with very low fees. This makes USDT a very attractive option, especially for users who transfer small amounts or frequently.

Concerns over Tether’s transparency and reserve assets

Concerns about Tether's transparency are one of the biggest disadvantages of USDT. In the past, there was a time when it was unclear whether 100% of the reserve assets were collateralized by cash or government bonds.

Now, Tether is conducting third-party audits of its reserve assets, but it will likely take time to dispel the image that has been ingrained since the beginning.

Impact of regulatory risks

Recently, there has been a trend toward stricter regulations on stablecoins. New regulations in the US and EU could undermine the credibility of USDT. In particular, changes in relationships with banks could affect the use of USDT.

Strengthening regulations could have a direct impact on the distribution and trading of USDT, which could be a concern for investors. In particular, it is necessary to consider the risk that stricter regulations could reduce USDT liquidity.

Fees vary depending on the blockchain network selected

USDT is available on different blockchain networks, but fees vary depending on the network. For example, gas fees can rise on ERC20, which can increase remittance costs. In particular, fees on the Ethereum network can rise sharply during peak transaction times, so you need to be careful about the timing of your remittances.

On the other hand, TRC20 has low fees, but the regulatory risk for Tron itself is increasing, so you need to be careful when choosing.

SPL has low fees and allows for fast remittances, making it one of the most convenient networks at present. On the other hand, the Solana network is unstable, with the network frequently being temporarily shut down due to increased demand.

Due to these factors, choosing which network to use is an important point when using USDT.

The growth of the stablecoin market

USDT is the top stablecoin by market capitalization and trading volume, and is likely to maintain that position in the future. Demand for USDT is expected to grow with the development of the DeFi (decentralized finance) and NFT (non-fungible token) markets. In particular, USDT is widely used in DeFi for liquidity provision, lending, and borrowing, which has led to an increase in USDT trading volume.

In addition, USDT is often used as a base currency for transactions in the NFT market, and it also plays an important role in purchasing art and digital assets. This is expected to lead to an increase in demand for USDT in the future.

Regulatory trends and their impact in each country

The US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) are currently rapidly developing stablecoin regulations. This may have some impact on the operation and distribution of USDT.

In addition, Japan has already established laws regarding stablecoins, and considering the regulatory developments in Europe, this will affect not only USDT but all stablecoins.

Relationship with CBDC (Central Bank Digital Currency) 

If digital dollars and digital euros become widespread, the role of USDT may change. CBDC is a digital currency issued by each country's central bank and is positioned as a digital version of legal tender. The spread of CBDC may reduce the demand for USDT, but conversely, a scenario in which CBDC and USDT coexist is also possible.

The key is how USDT coexists with the existing financial system. In particular, we need to keep an eye on how the use of USDT will change as CBDC becomes more widespread, but at this point in time, there are many unclear factors, including the spread of CBDC.

So far, we have explained about USDT. USDT is the most traded stablecoin and plays an important role in the cryptocurrency market.

The advantages are price stability, remittance speed, and liquidity, but the disadvantages are regulatory risk and transparency issues. It is important to consider how to utilize USDT while keeping an eye on the impact of future regulatory trends.

In particular, USDT is an important tool for providing liquidity in the cryptocurrency market and is indispensable for investors and traders. By utilizing USDT while responding to future market changes, more efficient trading and asset management will be possible.

Image: Shutterstock

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