What Is USDT (Tether)? Understanding Its Principles and Risks in 2025

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If you are new to the world of cryptocurrency, you’ve probably heard about USDT, also known as Tether. As the largest stablecoin by market capitalization and one of the most widely used digital assets, USDT plays a central role in crypto trading and transfers. However, it is also frequently mentioned in media reports due to its misuse in various illegal activities.

This article breaks down the fundamentals of USDT, how it works, its benefits, and the potential risks involved.

What Is USDT?

USDT, or Tether, is a USD-backed stablecoin launched in 2014. It is designed to maintain a 1:1 peg with the US dollar, essentially acting as a digital version of the dollar. Tether Limited, the company behind USDT, issues and manages the token across multiple blockchain networks, including Ethereum, Solana, and Tron.

As of 2025, USDT remains the most dominant stablecoin in the crypto market.

In the crypto community, USDT is often referred to as "U". For example, 600U means 600 USDT, which is roughly equivalent to 600 US dollars.

Key Features of USDT

1. Largest Stablecoin by Market Cap

Unlike traditional financial markets where fiat currencies like the US dollar or New Taiwan Dollar are used for transactions, cryptocurrencies often rely on stablecoins for trading. USDT is the most widely adopted stablecoin, known for its high liquidity and acceptance among traders and exchanges.

According to market data, the total market capitalization of USD-backed stablecoins exceeds $225 billion, with USDT accounting for approximately 63% of that share. The top three stablecoins by market size are USDT, USDC, and USDE.

2. Primary Trading Pair in Crypto

Due to its stability and deep liquidity, USDT is commonly used as a base currency for trading cryptocurrencies. On major exchanges like Binance, most trading pairs are against USDT. In contrast, US-based platforms like Coinbase often use USDC.

3. Fast and Low-Cost Transfers

USDT transactions are typically completed within minutes, offering a significant advantage over traditional cross-border bank transfers, which can take 3–5 days. This efficiency makes USDT ideal not only for crypto trading but also for international business settlements.

For instance, some companies use USDT to pay overseas suppliers, benefiting from its speed and cost-effectiveness.

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How Does USDT Work?

Tether generates revenue primarily through interest income.

When users purchase USDT, they exchange fiat currency for the stablecoin. Tether holds these funds in reserve and invests them in low-risk instruments such as U.S. Treasury bonds. The interest earned from these investments constitutes Tether’s main profit source.

For example, if Tether holds $80 billion in reserves and the annual yield on U.S. Treasuries is 5%, the company would earn approximately $4 billion in interest per year.

Reports indicate that Tether achieved a record $13 billion in net profit in 2024, surpassing the earnings of some major Wall Street institutions.

Is USDT a Scam?

USDT itself is not a scam. However, like other cryptocurrencies, it can be misused for fraudulent activities due to its pseudo-anonymous nature.

Common scam techniques include:

It's important to remember that most scams follow similar patterns—only the medium of exchange changes. Always verify information with trusted sources and consider consulting anti-fraud hotlines like 165 before investing.

Is USDT Legal in Taiwan?

Yes, USDT is legal in Taiwan. Holding or trading USDT is not illegal, as long as it is not used for unlawful purposes. The Financial Supervisory Commission (FSC) currently classifies cryptocurrencies as commodities rather than currencies.

The regulatory landscape is evolving, though. The FSC plans to introduce a dedicated virtual asset law by June 2025, which will include specific regulations for stablecoins like USDT.

How to Buy USDT

In Taiwan, the typical process for buying cryptocurrencies involves:

  1. Exchanging TWD for USDT
  2. Using USDT to buy other cryptocurrencies like Bitcoin
  3. Holding USDT between trades for flexibility

It is strongly recommended to use licensed local exchanges to purchase USDT. Avoid unauthorized sellers or platforms offering "wholesale prices," as these are often associated with fraud or money laundering.

Major compliant exchanges in Taiwan include:

These platforms offer online registration and customer support.

Transaction Fees

Buying USDT usually involves:

Using networks like BSC or Arbitrum can help reduce withdrawal costs.

How to Convert USDT to TWD

You can easily convert USDT to New Taiwan Dollars through compliant exchanges. The steps are:

  1. Choose a supported exchange
  2. Deposit USDT into your exchange wallet
  3. Sell USDT for TWD
  4. Withdraw TWD to your bank account

Most withdrawals are processed within one business day.

What Is a USDT Wallet?

A USDT wallet is a digital address that allows you to send, receive, and store Tether tokens. You can use:

Non-custodial wallets give you full control over your assets but require you to safeguard private keys. Exchange wallets are user-friendly but come with counterparty risk.

How to Receive USDT

To receive USDT, you need to provide:

  1. Your wallet address (a long string of letters and numbers)
  2. The correct blockchain network (e.g., Ethereum, TRON, etc.)

Always confirm the network used by the sender to avoid permanent loss of funds. When in doubt, test with a small amount first.

Is USDT Safe? Understanding the Risks

While USDT is designed to be stable, it is not risk-free. Key risks include:

1. Tether’s Solvency Risk

Tether claims to hold reserves exceeding 100% of USDT in circulation, primarily in U.S. Treasury bills. However, some critics question the transparency of their reserves since Tether is not a publicly audited company.

2. Difficulty in Redeeming USDT for USD

Although Tether allows large-scale redemptions, the process is not practical for most retail users. Requirements include:

3. Temporary Depegging Events

Although rare, USDT can temporarily deviate from its $1 peg during market turmoil. For example, during the May 2022 crypto crash, USDT briefly fell to $0.94.

The Future of USDT

USDT is increasingly recognized as a legitimate asset class globally. In September 2024, a UK high court ruled that USDT could be treated as property under the law, strengthening its legal standing.

This decision highlights the growing acceptance of USDT in mainstream finance.

Frequently Asked Questions

What is the value of 1 USDT in USD?

1 USDT is designed to be equivalent to 1 USD. Although it may experience minor fluctuations due to market supply and demand, it generally stays very close to this value.

How much is 1 USDT in TWD?

The value of 1 USDT in TWD depends on the current USD/TWD exchange rate. For example, if 1 USD equals 31 TWD, then 1 USDT is also worth approximately 31 TWD.

Is Tether going bankrupt?

There is no concrete evidence that Tether is facing bankruptcy. It remains the most widely used stablecoin. That said, users should stay informed and consider diversifying into other stablecoins to mitigate risk.

Can I use USDT for everyday purchases?

While possible, USDT is primarily used for trading, transfers, and investments. Some merchants accept it, but it is not as commonly used for daily transactions as traditional currencies.

What blockchains support USDT?

USDT is available on more than 17 blockchains, including Ethereum, TRON, Solana, and Binance Smart Chain.

How can I avoid USDT scams?

Stick to reputable exchanges, avoid too-good-to-be-true offers, and never share private keys or personal information with unverified parties.