What Is USDT, Tether's Stablecoin: How Issuance Works, What Is in the Reserves and What the Risks Are
With more than US$130 billion in circulation, USDT is the world's most widely used stablecoin. See who issues it, how the digital dollar is created and redeemed, what the September 2024 attestation shows about the reserves and where the risks lie.
Historical reference: December 10, 2024. Published on this site on November 2, 2026. Dates in the text identify the period covered.
In this article
Key points
- USDT is a token issued by Tether that aims to always be worth one US dollar. In November 2024, the total supply was about US$132.9 billion.
- Tether creates and redeems USDT only for verified customers, with a minimum amount of US$100,000. Everyday users buy and sell the token on exchanges, not directly with the issuer.
- In the September 30, 2024 attestation, done by BDO, the reserves totaled at least US$125.5 billion against US$119.4 billion of USDT issued, with US$102.5 billion in US Treasury securities.
- An attestation is not an audit, USDT has lost its peg before (in 2022) and the issuer can freeze balances. There is no insurance like the FGC (Brazil's deposit guarantee fund) for this kind of asset.
USDT (Tether) is the world's most widely used stablecoin: a digital token that its issuer promises to keep equivalent to one US dollar. Many people use it to buy and sell other digital currencies, store value in dollars and send money between countries. On November 26, 2024, the token's total supply was about US$132.9 billion, a record for the series, according to Cointelegraph. But USDT is not a dollar: it is a promise by a private issuer, and knowing what stands behind that promise helps gauge the risk.
What USDT is and who issues it
A stablecoin is a digital asset designed to hold a stable value, usually pegged to a currency. USDT, launched in 2014, belongs to Tether, a company in the same group as the Bitfinex exchange. Each token has a "face value" of one dollar and exists on several networks, such as TRON (TRC-20 standard) and Ethereum.
The token pays no interest to the holder. The one who profits from the model is the issuer: the dollars received in exchange for USDT are invested, mainly in US government securities, and the interest stays with Tether. In the third quarter of 2024, the company reported net income of US$2.5 billion, and US$7.7 billion over nine months.
How issuance and redemption work
The one-to-one peg rests on two mechanisms. The first is the creation and destruction of tokens. When a verified customer hands dollars to Tether, the company issues USDT; when the customer returns USDT, it receives dollars and the token is taken out of circulation. According to Tether's fee page, the minimum amount is US$100,000, issuance costs 0.1% and redemption costs 0.1% or US$1,000, whichever is greater, plus a US$150 verification fee. The company says it has "sole discretion" to approve or reject accounts.
The second mechanism is market arbitrage. If USDT falls to US$0.99 on an exchange, anyone with access to redemption can buy it cheap and exchange it for a dollar with Tether, which pushes the price back up. For ordinary users, this means the peg depends on a small group of large customers and, above all, on the confidence that Tether has the dollars to redeem.
What is in the reserves
Each quarter, Tether publishes an attestation of its reserves, carried out by the accounting firm BDO. The most recent to date is the one for September 30, 2024, released on October 31. The main figures:
| Item | Amount |
|---|---|
| USDT issued (liability) | US$119.38 billion |
| Reserve assets (minimum) | US$125.47 billion |
| Excess reserves | more than US$6 billion (calculation: US$6.09 billion) |
| Direct and indirect exposure to US Treasury securities | US$102.5 billion |
| Cash and equivalents | more than US$105 billion |
| Group equity | US$14.2 billion |
| Net income in Q3 | US$2.5 billion (US$7.7 billion over nine months) |
In simple terms: for every dollar of USDT issued, Tether states it holds about US$1.05 in assets. According to the company, most of it is in short-term US Treasury securities, repurchase agreements and money market funds. The remainder includes gold, bitcoin, secured loans and other investments, in a smaller proportion and with more volatile prices.
BDO verifies the numbers on a specific date, based on documents supplied by Tether. It is not a full audit of the financial statements, and Tether has never published one. For that reason, part of the market treats the issuer's transparency as a point of concern.
Risks: the peg, track record and issuer control
The track record explains why the question about backing keeps coming up. In October 2021, the US Commodity Futures Trading Commission (CFTC) fined Tether US$41 million for "false or misleading" statements about its reserves, which included assets that were not cash. The CFTC concluded that, between 2016 and 2018, the company held enough reserves to cover the tokens only 27.6% of the time. Tether disputes that reading and says there is no finding that the token ceased to be fully backed.
- 2014Launch of the token, then called Realcoin.
- 10/15/2021The CFTC fines Tether US$41 million for misleading statements about its reserves.
- May 2022After the collapse of TerraUSD, USDT falls below US$1 on exchanges (between US$0.95 and US$0.97, depending on the source) and Tether pays out billions in redemptions.
- October 2022Tether announces it has zeroed out the commercial paper in its reserves, previously one of the largest slices.
- 10/31/2024The Q3 attestation shows more than US$6 billion of excess reserves.
There are also risks that do not show up on the balance sheet. Tether can freeze USDT at suspicious addresses, which protects against fraud but shows that final control of the token lies with the issuer. And regulation is still being built: in the European Union, MiCA's stablecoin rules have applied since June 2024; in the United States, there is still no specific federal law. In Brazil, the Central Bank opened public consultations in November on virtual asset service providers.
What this changes in practice for people who use USDT
- Treat USDT as a digital asset, not a dollar account: it has no deposit guarantee or coverage from the FGC (Brazil's deposit guarantee fund).
- Do not leave more USDT than necessary sitting on platforms. For payments, convert and send within the planned timeframe.
- Follow the quarterly attestation and the price on exchanges: persistent deviations from the peg are the first sign of stress.
- Always confirm the network and the token contract before sending, so you do not pay with a fake token or on the wrong network.
Frequently asked questions
Who issues USDT?
USDT is issued by Tether, a private company in the same group as the Bitfinex exchange. It creates the token when verified customers deposit dollars and destroys it when they request redemption.
Is USDT backed by dollars?
Tether says each USDT is covered by assets of equal or greater value. In the September 30, 2024 attestation, the reserves totaled at least US$125.5 billion against US$119.4 billion issued, largely in US Treasury securities. The attestation is not a full audit.
Can USDT lose its one-dollar value?
Yes. In May 2022, during the TerraUSD crisis, the token traded as low as about US$0.95 on exchanges before returning to the peg. Drops depend on confidence in the issuer and on liquidity for redemptions.
Can anyone redeem USDT directly with Tether?
Generally not. Direct redemption requires a verified account and a minimum of US$100,000, with a fee of 0.1% or US$1,000, whichever is greater. Most users sell the token on an exchange or platform.
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Sources
- Tether hits $7.7 billion in 2024 nine-month profits, $102.5 billion in U.S. Treasury holdings (Q3 2024 attestation) · Tether, Oct 31, 2024
- Fees · Tether, Dec 10, 2024
- CFTC Orders Tether and Bitfinex to Pay Fines Totaling $42.5 Million (Release 8450-21) · U.S. Commodity Futures Trading Commission, Oct 15, 2021
- Ethereum reclaims USDT dominance against Tron after 2 years · Cointelegraph, Nov 26, 2024
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