Risks of holding USDT: peg, freezes, reserves

The risks start with the issuer. Tether says reserves back each token, and that promise creates the peg, the doubts and the freeze power.

What Is USDT and Who Issues It?

USDT is the currency code for the Tether token tied to the US dollar. Tether issues it, and the company says reserves back each token, but holding USDT is not a bank deposit.

How Can USDT Lose Its Peg?

A peg holds only while holders believe they can sell or redeem USDT near a dollar. On 15 October 2018, the tether price briefly fell to $0.88 on Bitfinex as confidence broke.

Are Tether's Reserves Fully Audited?

Tether says reserves back its tokens, but it usually publishes attestations, not full audits. An attestation is a limited review by an accounting firm, while a full audit tests assets more deeply.

What US Rules and Freezes Affect USDT?

Tether's terms let it freeze USDT in wallets, including private wallets, when law enforcement asks. A freeze can happen without your consent, and US regulators watch stablecoin reserves.

• The CFTC says most virtual currency cash markets are unregulated.
• The CFTC warns cash markets can be manipulated and flash crash.
• Tether and Bitfinex settled with the CFTC in 2021 over reserves.

What Goes Wrong on the Wrong Network?

USDT exists on more than one blockchain, and each network has its own addresses. If you send USDT on a network the receiving wallet does not support, the tokens can be lost permanently.

Written byVahe HakobyanVahe Hakobyan is the editor-in-chief of World-Crypt. He covers bitcoin, markets and regulation, and leads the newsroom that fact-checks every story before it goes live.