Why is Tether not as reliable as it seems?

Tether — the most popular stablecoin in the crypto space. Tether is pegged to the US dollar at a 1:1 ratio and is widely used by traders, exchanges, and exchangers worldwide. However, despite its massive market presence, it continues to face questions around transparency, regulation, and stability.

This article explains why Tether should not be seen as a safe alternative to fiat money — especially if you're just entering the world of crypto.

Tether has never undergone a full audit

While the company claims its stablecoin is fully backed by reserves, Tether has never undergone an independent audit in the traditional sense. Instead, it publishes so-called attestations — accounting reports confirming the existence of assets at a given point in time. These documents, however, do not provide a full picture of the company's reserves.

Unlike full audits, attestations don’t verify the origin of funds, don’t analyze reserve movements over time, and don’t confirm legal ownership of the assets. As of 2025, none of the world’s top audit firms — Deloitte, PwC, EY, or KPMG — work with Tether, raising concerns in the professional community.

Lack of banking license and regulation

Unlike banks or payment systems, Tether does not hold a banking license and is not a regulated financial entity. The company is registered in an offshore jurisdiction — the British Virgin Islands — where regulatory oversight is minimal.

This means that in case of any issues with Tether, you have no guarantees of recovering your funds. Your deposits are not protected by any government program, unlike traditional bank deposits. Nor is Tether overseen by US authorities like the SEC or FDIC.

Fines and scandals are not uncommon

Over the years, Tether has repeatedly been involved in scandals and investigations. In 2021, the New York Attorney General fined the company $18.5 million for misleading statements about reserves. That same year, the US Commodity Futures Trading Commission (CFTC) issued a separate $42 million fine for partially backing USDT with fiat assets.

These incidents point to a recurring pattern of lacking transparency — something users should be cautious about.

USDT isn’t always stable during crises

Stablecoins are meant to remain stable — it’s their core function. But in practice, Tether has shown instability under market pressure. For example, during the 2022 FTX collapse, USDT dropped to $0.96–0.97 on some platforms. In March 2023, when USDC lost its peg due to the collapse of Silicon Valley Bank, USDT’s price surged — a sign of panic rather than true stability.

This is especially risky in DeFi, where even short-term depegging can trigger liquidations and financial losses.

Why is USDT still popular?

Despite all the risks, USDT remains the most used stablecoin. This is due to its high liquidity, support across most exchanges and platforms, and its widespread use for trading and value storage. In many regions, USDT has become synonymous with the digital dollar.

Conclusion

Tether is not a scam — but it's also not a guarantee of financial security. If you're new to crypto, it's crucial to understand the risks behind its convenience. It’s not the same as holding US dollars in a bank. For greater stability, consider diversifying or choosing stablecoins that undergo regular audits and operate within regulated frameworks.