For holders of fiat-backed stablecoins, the best form of protection is the issuer being regulated as a stablecoin issuer. The next best option is being regulated as a financial institution. Tether meets neither of these criteria. Tether and its management personnel have claimed that Tether is a regulated entity but this claim arises from Tether’s registration with FinCen as a ‘money service business’ (MSB). 

As per FinCen, “The inclusion of a business on the MSB Registrant Search Web page is not a recommendation, certification of legitimacy, or endorsement of the business by any government agency”.

In the event of Tether going bankrupt, USDT holders' assets are not bankruptcy-remote.