What Is USDT (Tether)

What is USDT and What Backs It?

When asking what USDT is in practical terms, the answer starts with its reserve structure. Tether issues USDT against a reserve pool that includes cash, cash equivalents, US Treasury bills, and other assets. The reserve composition has evolved considerably since USDT launched in 2014. In earlier years involved a reserve structure that attracted regulatory scrutiny and enforcement actions, including a 2021 settlement with the New York Attorney General over misrepresentations about reserve backing.

Since then, Tether has moved toward a reserve composition more heavily weighted toward US Treasury bills, a shift that has brought its structure closer to the model Circle uses for USDC, though with meaningful differences in disclosure. Tether publishes quarterly assurance reports from independent accountants rather than monthly attestations, and the level of detail in those reports has historically been less granular than Circle's disclosures on USDC reserves.

For enterprise treasury teams, this is not an abstract distinction. It is the central due diligence question when evaluating USDT for institutional payment use: are the reserves sufficient, transparent enough, and structured in a way that the company's compliance team can sign off on? The answer varies by institution, by jurisdiction, and by how much of the payment flow USDT exposure represents.

Why USDT Has the Liquidity Depth It Does

USDT's dominant market position is not accidental. It launched years before USDC and built liquidity across every major exchange, blockchain network, and payment corridor during a period when it had no serious institutional competitor. That first-mover advantage created a self-reinforcing network effect: more liquidity attracted more users, which deepened liquidity further.

The practical consequence for cross-border payment infrastructure is that USDT is available and liquid in markets where USDC is thinner, particularly across parts of Asia, Latin America, the Middle East, and Africa, where USDT became embedded in local trading and payment activity before institutional stablecoins were a meaningful category.

For a payment platform routing transfers into markets like Turkey, Vietnam, or Nigeria, USDT's liquidity depth in those corridors is operationally relevant in a way that reserve transparency comparisons don't fully capture. The on-ramp and off-ramp infrastructure in those markets was built around USDT. Converting USDC in a thin corridor introduces slippage and execution risk that using the locally liquid stablecoin avoids.

Where USDT Runs

USDT operates across more blockchain networks than any other stablecoin, which is part of what has made it the default settlement instrument in markets where infrastructure has developed around specific chains:

• Tron: the network where the majority of USDT transaction volume occurs, due to very low fees and fast confirmation times. Widely used for USDT transfers in Asia and emerging markets
• Ethereum: deep institutional integration and broad platform support, though higher fees than Tron for individual transactions
• Solana: sub-second confirmation and low fees, increasingly used for high-frequency USDT payment flows
• BNB Chain and Avalanche: used in specific regional payment corridors where these networks have established local infrastructure

For enterprise payment purposes, the network choice is typically handled by the payment platform rather than the treasury team. What matters operationally is that USDT on any of these networks settles in seconds, holds its dollar peg, and produces an on-chain transaction record that both parties can independently verify.

USDT in a Real Cross-Border Payment

A UK staffing company pays contractors across Southeast Asia, Indonesia, Vietnam, Philippines monthly. For each corridor, the payment platform assesses which stablecoin has the deepest local liquidity and the most reliable off-ramp infrastructure. In several of these markets, USDT is the stablecoin.

The UK company's pounds convert to USDT at the on-ramp. USDT moves on-chain to each contractor's payment address, and settlement is confirmed in seconds. Each off-ramp converts USDT to local currency through local payment rails: Indonesian rupiah, Vietnamese dong, and Philippine pesos credited to local bank accounts. The UK company sent GBP. Each contractor received local currency. USDT handled the settlement leg in each corridor, chosen because local off-ramp liquidity made it the operationally efficient instrument for those specific markets.

The USDT was present in the infrastructure for seconds. Neither the company nor the contractors held it on their balance sheets.

USDT vs USDC: How Enterprise Teams Should Think About It

The honest framing is that USDC and USDT are complementary rather than competing instruments in a well-designed enterprise payment infrastructure. They solve the same core problem, cross-border settlement without correspondent banking, but their relative advantages depend on context.

USDC is the cleaner compliance story: transparent reserves, monthly attestations, explicit design for institutional use, and US regulatory positioning that makes it easier for corporate compliance teams to approve. For payment flows where reserve documentation and regulatory provenance matter most, particularly in the US and EU, USDC is typically the default.

USDT is the deeper liquidity story: broader corridor coverage, established infrastructure in emerging markets, and transaction volumes that no other stablecoin approaches. For payment flows where reaching the destination efficiently matters most, particularly in markets where USDC infrastructure is thinner, USDT's liquidity depth is the relevant advantage.

Enterprise payment platforms that use only one are optimising for one variable at the expense of the other. Platforms that use both route each payment through the stablecoin best suited to its specific corridor and compliance context, which is how the infrastructure question should be approached.

How Merge Uses USDT

Merge uses USDT alongside USDC as a settlement instrument for cross-border B2B payments, deploying each based on corridor liquidity and payment context. The USDT leg is managed within Merge's regulated custody infrastructure; enterprise clients don't hold or manage USDT directly.