- March 30, 2023
USDT is a cryptocurrency, also known as a stablecoin, whose value is generally pegged to the U.S. dollar. USDT was issued by a company called Tether in 2014 to provide a stable value to reduce the volatility of cryptocurrencies. USDT is supported by blockchain technology and can be bought and sold on cryptocurrency exchanges.
Tether claims that each USDT represents the value of one U.S. dollar, and the value of USDT is stabilized by linking each USDT to the U.S. dollar. It means that when a person buys 1 USDT, he or she is actually buying the equivalent of 1 U.S. dollar (USD). USDT is relatively stable in value, so it is often used as a trading medium on cryptocurrency trading platforms. In addition, USDT has a very large trading volume in the cryptocurrency exchange market and is one of the most commonly used stablecoins in the cryptocurrency market.
Due to the relatively stable value of USDT, many people choose to use it as a stable currency for transactions or to buy other cryptocurrencies because USDT is usually less volatile than other cryptocurrencies. However, some people have questioned whether USDT's backing assets really exist, especially whether Tether has enough reserves to support the value of USDT. In addition, some people think that Tether lacks enough assets, such as U.S. dollars, to support USDT and doubt Tether's transparency and reliability. These disputes triggered a crisis of market confidence in USDT.
In addition, USDT has also been accused of price manipulation in the market due to its high correlation with the price movement of Bitcoin. Nevertheless, Tether has always emphasized the authenticity of its backing assets and the stability of USDT. Tether publishes monthly reports on supporting assets to prove that the value of USDT is supported. These measures help to boost market confidence in USDT.
USDT is also supported and adopted by many cryptocurrency exchanges, making it an integral part of the cryptocurrency market. In addition, the ease of use and liquidity of USDT is also one of the reasons for its popularity. Despite the controversies and doubts facing USDT, its importance, and stability in the cryptocurrency market remain, becoming an indispensable tool for many investors and traders.
USDT is a stable currency whose value is generally pegged to the U.S. dollar and issued by Tether. Although USDT is widely used in the cryptocurrency market, its security has always been the focus of attention. Below we will analyze some viewpoints on the security of USDT.
1. Reserve Fund Issue
The most important issue for the security of USDT is the issue of reserves. The reserve fund refers to the U.S dollar reserve held by Tether, which is used to support the value of USDT. However, some have questioned whether the Tether company has enough U.S. dollar reserves to support the value of USDT. If Tether cannot honor the value of USDT, then the value of USDT will collapse, affecting the stability of the entire cryptocurrency market.
Tether once claimed that its reserves corresponded one-to-one with USDT issuance, but this has never been independently verified. In addition, Tether has been accused of using USDT to purchase Bitcoin, thereby affecting the price of USDT and Bitcoin. This behavior is considered to be a price manipulation of the market, further damaging the confidence of USDT.
2. Regulatory Issues
The security of USDT is also affected by regulatory issues. Since the legal and regulatory environment of the cryptocurrency market has yet to fully mature, there have been regulatory issues with USDT. In addition, there are also some issues with Tether's own operations, such as a lack of transparency and compliance.
In addition, the U.S. Securities and Exchange Commission (SEC) has filed a lawsuit against Tether, alleging that the company issued securities without registration. This lawsuit may have a negative impact on the development of USDT, thereby further damaging the confidence and stability of USDT.
3. Technical risk
The security of USDT is also affected by technical risks. USDT is issued based on blockchain technology, so there are risks associated with blockchain technology. For example, USDT may be affected by 51% attacks, double payment, and other attack methods.
In addition, the risk of Tether being hacked also exists. If the hacker attack is successful, the reserves held by Tether may be stolen, which will affect the value and stability of USDT.
USDT has a close relationship with the online gaming industry. The iGaming industry has always been subject to strict regulations and legal restrictions, making conducting transactions and payments through traditional financial institutions difficult. The stability, convenience, and circulation of cryptocurrencies are one of the few reasons for their popularity. In the iGaming market, USDT is one of the most commonly used stablecoins because it has the following advantages:
The value of USDT is stable and is usually used as a trading medium for iGaming platforms. Many people use USDT to convert the value of their cryptocurrencies into a stable value, reducing volatility in the cryptocurrency market. This conversion can make it easier for people to trade in the cryptocurrency market and reduce people's risk to the cryptocurrency market.
2. Convenience and circulation
USDT can be transferred quickly around the world, and the transfer fee is low. As a result, users can transfer funds anywhere in a short time. It makes deposits and withdrawals easier for users of iGaming platforms. Also, because USDT is widely used on cryptocurrency exchanges, it is easy to obtain.
Due to the anonymity of USDT, users can conduct transactions through USDT without revealing sensitive information such as personal identity. Therefore, it makes it easier for users of iGaming platforms to maintain their anonymity, thereby reducing the risk of attacks.
In addition, since USDT is pegged to the U.S. dollar, stable currency conversions between different countries and regions are possible. It makes USDT a very convenient cross-border transfer tool. Since USDT is issued based on blockchain technology, the transfer speed is usually faster than traditional transfer methods.
1. Other cryptocurrency transactions
USDT is widely used in cryptocurrency exchanges, and users can use USDT for purchases, transactions, transfers, and other operations. Due to its stability, many exchanges support using USDT for transactions. USDT can be used to buy other cryptocurrencies such as Bitcoin, Ethereum, etc. In addition, USDT can also be used to conduct transactions between cryptocurrencies, such as converting Bitcoin to Ethereum, etc.
2. Living shopping payment
Some online merchants and retailers have also begun accepting USDT as a cryptocurrency payment method. As a result, users can use USDT to purchase goods or services, reducing their dependence on legal tender.
3. Store of value
Due to the stable value of USDT, it can be used as a store of value for cryptocurrencies. Therefore, many people use USDT to convert the value of their cryptocurrencies into a stable value, reducing volatility in the cryptocurrency market. This conversion can make it easier for people to trade in the cryptocurrency market and reduce people's risk to the cryptocurrency market.
4. Cross-border transfer
Since the value of USDT is pegged to the U.S. dollar, stable currency conversions between different countries and regions are possible. It makes USDT a very convenient cross-border transfer tool. Since USDT is issued based on blockchain technology, the transfer speed is usually faster than traditional transfer methods.
5. Money laundering tools
USDT is considered a possible risk of money laundering. Because USDT transactions are based on blockchain technology, which is inherently anonymous and allows users to remain unidentified. In addition, USDT can be traded globally, which may allow criminals to use USDT for cross-border fund transfers, money laundering, and other illegal activities.
However, USDT itself is not an illegal cryptocurrency but a stablecoin. Tether claims that they have certain anti-money laundering measures, such as implementing the Know Your Transaction (KYT) program, to ensure the legality and traceability of transactions. In addition, Tether is constantly improving its anti-money laundering and anti-terrorist financing measures to maintain the legitimacy and credibility of its stablecoin. Overall, the money laundering risks of USDT are also similar to other cryptocurrencies.
At present, most countries in the world have not explicitly banned the use of USDT, but some countries and regions have put forward some regulatory requirements for USDT and other stablecoins, such as:
1. Mainland China
China has heavily regulated cryptocurrencies over the past few years, including using USDT and other stablecoins. In May 2021, the People's Bank of China (PBOC) issued a statement announcing that financial institutions and payment institutions are prohibited from engaging in cryptocurrency-related businesses, including stablecoins.
The Indian government has banned cryptocurrencies. In July 2019, a draft law drawn up by a high-level government panel in India banned all forms of private cryptocurrencies, recommending a fine of up to 250 crore rupees and a prison term of up to 10 years for anyone engaging in such transactions. In March 2021, Indian government officials stated that India intends to legislate to ban cryptocurrencies and punish trading or even holding cryptocurrencies. The new law will give cryptocurrency holders six months to liquidate such assets.
3. United States
The U.S. Securities and Exchange Commission (SEC) has been regulating cryptocurrencies and has introduced some specifications and requirements for certain stablecoins.
The Law on the Central Bank of Egypt and the Banking System, promulgated by Law No. 194 of 2020, prohibits issuing, trading, or promoting cryptocurrencies, creating or operating trading platforms, or related activities. Those who are found using USDT will be imprisoned and fined not less than 1 million pounds and not more than 10 million Egyptian pounds [US$516,340], or either of these penalties.
According to the Davos survey of the World Economic Forum, by 2027, 10% of the global GDP will be stored on the blockchain. The top three cryptocurrencies by market capitalization include Bitcoin BTC, Ethereum ETH, and Tether USDT. USDT is a stable currency whose value is pegged to the U.S. dollar. USDT can perform stable currency conversion between different countries and regions, and the transfer speed is usually faster than traditional methods.
However, because USDT can be traded globally, it has also been questioned that it may be used for illegal activities, such as cross-border fund transfer and money laundering. Furthermore, because its transactions are based on anonymous blockchain technology, users can maintain anonymous transactions that are difficult to trace. In addition, USDT is also closely related to the online gaming industry.
According to the analysis of TC-Gaming's big data database, as of 2023, many online gambling platforms have already provided players with USDT payment. Because using USDT can bypass the supervision of traditional financial institutions, and the transaction speed is very fast, it is very convenient for players. Furthermore, due to the anonymity of USDT, most players also use USDT for gambling and betting to hide their identities and transaction records. Among them, the Vietnamese online gaming market uses USDT as the most popular payment method. With the development of the online gambling market in Southeast Asia, the number of USDT users is also increasing. A 2022 report from Chainalysis pointed out that Vietnam is one of the countries with the highest cryptocurrency adoption rate in the world, which shows that cryptocurrency transactions are very mature and popular in Vietnam.
In summary, USDT, as a stable currency, has a broad application prospect due to its stable value and high liquidity. Furthermore, the emergence of cryptocurrency solves the payment problem that the online gaming industry has been plagued by. As the popularity of USDT increases, USDT will eventually become the mainstream payment channel in the online gambling market.