Tether Holdings’ Strategic Move: Focusing on Stability over a New Blockchain
Tether Holdings, the issuer of the world’s largest stablecoin USDT, has recently announced a strategic decision to forgo plans for launching its own blockchain. The move reflects an understanding of the saturated market dynamics and the principles of supply and demand, according to Paolo Ardoino, Tether’s chief executive officer, in an interview with Bloomberg news.
There Are Already Well-Established Blockchains
Ardoino highlighted that despite Tether’s advanced technological capabilities, the blockchain market is already populated with various well-established and efficient options. Tether’s USDT, with a market cap of $117 billion, plays a crucial role in global crypto trading and remittances.
While Tether has the resources to develop its blockchain, refraining from doing so aligns with the dominance of a few major chains in the market. Data indicates that the top five chains out of 306 in existence control approximately 86% of the total value of assets locked. Ethereum leads this group with a Total Value Locked (TVL) of $87.7 billion out of the $133.2 billion across all chains.
TRON, another significant player, manages $8.1 billion in TVL and supports 49% of USDT’s supply. Factors like speed, low fees, use cases, and robust security play key roles in the success of a blockchain. Ethereum’s position can be attributed to its first-mover advantage, the flexibility it offers for smart contract development, and hosting the second-most liquid token, despite higher fees.
The blockchain ecosystem has evolved into a multichain environment, prompting developers and issuers to spread their operations across various platforms. Tether remains committed to prioritizing security and sustainability for USDT, regardless of the blockchain it operates on.
Concerns Around Tether Reserves
Despite Tether’s significant success, concerns persist in the crypto community regarding the quality of assets backing USDT. A recent United Nations report flagged TRON’s popularity among cyber fraud and money laundering activities in Southeast Asia.
Tether has responded to these concerns by emphasizing its collaboration with law enforcement and the traceability of its token. In a move to enhance awareness and education around digital assets, Tether partnered with Fuze, a digital asset infrastructure provider earlier this year. Their collaboration aims to address various aspects of education within the digital asset space, including compliance, regulatory framework development, and cross-border payment solutions.
In an effort to broaden its utility, Tether introduced a new payment option for the people of the Philippines, enabling them to utilize USDT for their social security system (SSS) contributions. The SSS is a government-run social insurance program that supports employees in both formal and informal sectors.
In conclusion, Tether’s decision to focus on stability over launching its blockchain reflects a nuanced understanding of the evolving crypto landscape. By prioritizing security, sustainability, and strategic partnerships, Tether aims to strengthen its position in the market while addressing concerns surrounding asset reserves and enhancing utility for its users.
