Tether's USDT's critical role in the global financial system and its compliance prospects

Paolo Ardoino, CEO of Tether, recently highlighted the key role of its stablecoin USDT in increasing demand for the U.S. dollar in emerging markets. He noted that USDT not only fuels demand for U.S. public debt but also provides financial services to more than 300 million users worldwide.

It is reported that Ardoino’s comments were in response to an article stating that dollar-backed stablecoins fueled demand for U.S. public debt.

More than 300 million people use USDT

Paolo Ardoino, CEO of Tether, revealed that more than 300 million people around the world use USDT as a digital dollar to provide basic financial services to communities in developing countries. This stablecoin bypasses the traditional financial system by increasing the efficiency of transferring and storing funds, providing convenience to underbanked populations who are typically excluded.

Ardoino emphasized that most of these users are unbanked and are affected by high inflation and rapid depreciation of their national currencies. “More than 300 million people around the world use USDT as a digital dollar, providing lifeline utility to entire communities in developing countries,” he wrote.

This means that if Tether were a country, it would be ranked ahead of countries like Indonesia, Pakistan, and Nigeria. Therefore, this shows that the high adoption rate of USDT has a significant impact on the global financial system. .

Ardoino noted that Tether is one of the top three buyers of short-term U.S. Treasuries globally, and among the top twenty buyers overall. This reflects Tether’s growing influence in the financial sector and the increasing integration of virtual assets into the traditional financial system.

According to Tether’s first-quarter assurance report, the company held approximately $90.87 billion in U.S. Treasury securities as of March 31, 2024. These holdings include direct and indirect ownership in U.S. Treasury securities, with indirect exposure including overnight reverse repurchase agreements collateralized by U.S. Treasury securities. The firm also invests directly in U.S. Treasury securities through money market funds.

Tether USDT U.S. Treasury Bond Holdings | Source: Tether

USDT Market Demand and Regulatory Review Faced

Tether’s USDT is the dominant stablecoin in the industry, with a market value of more than $1,112 billion. The digital asset controls about 70% of the market, according to CoinMarketCap, and its trading volume has even surpassed Bitcoin to become the largest cryptocurrency on the market.

A report by Chainalysis noted that demand for stablecoins such as USDT is growing steadily in emerging markets such as Nigeria, Turkey, Thailand, and Brazil. This shows that USDT is not only popular in mature markets, but also plays an important role in emerging economies.

Despite Tether’s dominance in the market, it still faces ongoing regulatory scrutiny. Regulators are increasingly paying attention to stablecoins, which could have an impact on Tether’s operations and market position.

Meanwhile, Ripple’s CEO Brad Garlinghouse recently stated that the U.S. government may take action against assets such as USDT. This concern reflects the industry's sensitivity to changes in the regulatory environment.

However, Tether representative Ardoino refuted Brad Garlinghouse’s remarks. This shows that Tether is confident in its compliance and market position and does not believe that regulatory actions will have a material impact on it.

Conclusion

As the world's leading stablecoin, Tether's USDT not only plays a vital role in emerging markets to promote global demand for U.S. dollars, but also has an increasingly significant influence in the global financial system. At the same time, Paolo Ardoino’s comments and Tether’s financial report show that USDT has significantly changed the way funds are stored and transferred by providing financial services to more than 300 million users, especially those communities underserved by the traditional banking system.

While Tether faces continued scrutiny from regulators and concerns within the industry that it may be affected by government action, Ardoino’s firm response demonstrates Tether’s confidence in its compliance and market position.

We believe that as the demand for USDT in emerging markets continues to grow, Tether’s USDT is expected to continue to play its key role in the global financial system. At the same time, how it responds to regulatory challenges will also be a key aspect of future development.

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