What is USDT (Tether Coin)? A Complete Guide to Its Features, Taxes, and Controversies

Summary

• USDT is a stablecoin pegged 1:1 to the U.S. dollar (USD).

  • When USD/JPY is 150, USDT ≈ 150 JPY (maintained via market mechanisms).

• Issued by Tether Limited, which claims to hold equivalent cash/reserves for every USDT in circulation.

  • Long-standing skepticism about reserves persists, but Tether now discloses portfolios including U.S. Treasuries.
• Market cap ranks 4th among cryptocurrencies, serving as a base currency for global exchanges.
• Critical risks: Potential depegging if Tether fails to manage supply/redemption, which could destabilize crypto markets.

Key Features of USDT

1. Stablecoin Mechanism

USDT maintains its peg through:

• Minting/Burning: Tether issues new USDT when investors deposit USD/assets and burns USDT upon redemption.
• Supply Control: Adjusts circulation to match demand, stabilizing the 1:1 dollar peg.

2. Blockchain Compatibility

Supported networks:

• Ethereum (ERC-20)
• Tron (TRC-20)
• Omni Layer
• EOS

👉 Compare USDT fees across blockchains

USDT vs. Other Stablecoins

| Feature | USDT | USDC | DAI |
|--------------|---------------|---------------|--------------|
| Issuer | Tether Limited | Circle | MakerDAO |
| Backing | Mixed assets | Cash/U.S. Treasuries | Crypto-collateralized |
| Transparency | Regular audits | Fully reserved | Decentralized |

Best for:

• USDT: High liquidity, global exchange pairs.
• USDC: Regulatory compliance.
• DAI: Decentralization purists.

Risks of Holding USDT

1. Centralization Risk: Tether’s reserves aren’t fully audited by third parties.
2. Regulatory Uncertainty: Potential crackdowns on stablecoins (e.g., 2023 Japan’s Payment Services Act).
3. Limited JPY Access: Most Japanese exchanges don’t support direct USDT trading.

👉 How to buy USDT safely

FAQs

Q: Is USDT safer than Bitcoin?

A: Yes for stability (pegged to USD), but no for decentralization—Tether’s solvency is key.

Q: Can USDT lose its peg?

A: Yes, if Tether fails to honor redemptions or faces a bank run. Historical deviations were brief (<1%).

Q: How do I convert USDT to JPY?

A: Trade USDT for BTC/ETH on an overseas exchange, then sell for JPY on a local platform (e.g., Bitbank).

Future Outlook

• Opportunities: Cross-border payments, DeFi integrations.
• Threats: Regulatory scrutiny, competition from CBDCs.

Pro Tip: Diversify across USDT, USDC, and BTC to mitigate risks.