Tether

• Tether is the oldest (or longest-surviving) and largest stablecoin issuer by supply market share. Initially launched in 2014, Tether issued USDT to facilitate trading on centralized exchanges. Early integrations allowed USDT to gain a first-mover advantage and significant network effects.

• Tether has been the subject of scrutiny and penal actions from regulators like the New York Attorney General and the Commodity Futures Trading Commission. This largely stemmed from Tether’s claim that each USDT is backed by $1 whereas each USDT is backed by a portfolio of assets held by the Tether Group.

• USDT is fully backed by reserves of the Tether Group. The issuer continues to invest primarily in US treasury bills and obligations collateralized by them. This asset presents some of the lowest credit and duration risks, while trading in a highly liquid secondary market.

• Despite this, Tether continues to invest a significant portion of reserves in riskier assets like secured loans, corporate bonds, gold, and bitcoin. It does not disclose the full composition of assets or identify the custodians who hold them.

• Tether has acquired a Digital Asset Service Provider (DASP) license in El Salvador. While the license does not mandate key provisions such as bankruptcy remoteness, we continue to monitor new information to evaluate the effectiveness of the license.

• Despite widespread accusations of under-collateralization, Tether has consistently fulfilled all redemptions. This has helped USDT regain its $1 peg through multiple stress tests since 2014. However, access to primary liquidity is restricted to high net-worth or institutional users.

• USDT is suitable for non-US, institutional users or high net-worth traders who can onboard with Tether to directly access the mint and redeem mechanism. Users who are unable to do so will need to rely on secondary markets on exchanges or liquidity pools.

• USDT is only recommended for users who want to access its industry-leading liquidity depth, volume market share, and breadth of trading pairs. The majority of retail users and traders who tend to be less active market participants are better served by more transparent and more regulated alternatives.

USDT's rating can be upgraded from D to C by:

• Increase frequency of reserve attestations from quarterly to monthly.

• Publish a full-scope audit of consolidated financial statements from an independent auditor.

• Incorporate a transparent and reasonable policy for redemptions in the company’s terms of service (similar to those required by the New York Department of Financial Services).