USDT is a stablecoin issued by Tether and pegged to the US dollar on a one-to-one basis. Tether says every token is backed by its reserves, but only verified Tether customers can redeem directly. USDT runs on several blockchains, so sender and recipient must use the same network. Transfers are generally irreversible, Tether can freeze tokens in some circumstances, and there is no deposit insurance or chargeback.
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What USDT is
USDT is a token issued by Tether that is pegged to the US dollar on a one-to-one basis1. It lets people hold and send a dollar-denominated balance on public blockchains, without routing each transfer through a bank.
Tether says its tokens are fully backed by its reserves1. Its terms also state that the tokens are not legal tender, are not backed by any government, and are not covered by deposit insurance2.
Backing and redemption
A stablecoin is only as stable as confidence in its reserves and in the ability to redeem it. Under Tether's terms, you must be a verified Tether customer to have tokens issued or redeemed directly2, and its FAQs describe a non-refundable verification fee for new customers1.
Most people therefore buy and sell USDT on exchanges. The rate there depends on that market at that moment, not on a guaranteed dollar.
Reserve claims have been challenged before. In 2021 the US Commodity Futures Trading Commission fined Tether $41 million and found that, in a 26-month sample period between 2016 and 2018, it held enough fiat reserves to back tokens in circulation on only 27.6% of days3.
Stablecoins as a category can fail. The UK Financial Conduct Authority warns that some stablecoins with no backing assets have lost their value completely, citing the collapse of TerraUSD in 20224. USDT is structured differently, but the example shows that "stable" describes a design goal rather than a promise.
Networks and why they matter
USDT is available on several blockchains, including Ethereum and Tron1. Tether calls these transport protocols and tells users to check the destination address carefully to confirm they are selecting the correct one when sending1.
The same token on two networks cannot be exchanged in a single transfer. Sending on a network that the receiving wallet or service does not support can leave the funds inaccessible.
Network fees are paid in each network's own asset, not in USDT. On Ethereum, for example, fees must be paid in ether5, so a wallet holding USDT but no ether cannot send it.
Freezing and central control
Unlike bitcoin, USDT has a central issuer with power over the token. Tether's terms allow it to blacklist addresses holding Tether tokens and to freeze them2, and its FAQs say it may act on demands from governments, law enforcement or other authorities1.
That control can help in some theft cases. It also means your ability to move a balance depends on decisions made by a company, not only on the network.
Reversibility and protection
Tether's control does not create a dispute process for ordinary users. A USDT transfer to the wrong address or to a scammer behaves like any other crypto payment: the US Federal Trade Commission notes that you can usually only get crypto back if the person you paid sends it back6.
There is no chargeback, and Tether's terms rule out deposit insurance2.
Privacy
USDT transactions on public blockchains are visible to anyone, like other crypto transactions6. Exchanges that sell USDT generally verify identity, which links your addresses to you in their records.
Scams involving USDT
A steady dollar price makes USDT easy to present as cash, so it can appear in schemes that show a growing dollar balance and then demand extra payments before any withdrawal. Address poisoning is also a risk: attackers place lookalike addresses in transaction histories, and Ledger advises checking the full address, not just the first and last characters7.
Tokens can also be created with names that imitate USDT. Checking token details against Tether's own published information avoids accepting or sending a copy.
What to check before using USDT online
- The exact network the recipient supports, and that your wallet is sending on the same one.
- That you hold enough of the network's own asset to pay the transaction fee.
- The full destination address, and the token details against Tether's official information.
- Who holds the keys: you, or an exchange that can restrict withdrawals.
- The spread and fees when converting into and out of USDT.
- That the recipient is identifiable and contactable outside the blockchain.
For the Maldives legal position, see the Maldives gambling bill. General crypto risks are covered in how cryptocurrency payments work.