In 2022, Tether USDT processed a whopping $18.2 trillion in transactions, surpassing traditional payment giants like Visa and Mastercard. This milestone illustrates the rapid growth of stablecoins in recent years, especially in countries where national fiat currencies are struggling. Despite the challenges faced by the crypto industry, stablecoins like Tether have continued to thrive.
Although Tether experienced significant adoption in 2022, it also faced some difficulties throughout the year. Concerns about its reserves and solvency were raised following the collapse of Terra UST and the FTX crypto exchange. During Terra’s crash, Tether briefly lost its peg to the US Dollar and had to honor over $10 billion in redemptions. Speculations about its financial health led traditional financial institutions to take short positions against USDT.
While Tether remains a dominant player in the stablecoin market, competitors like USDC and BUSD made gains against it in 2022. Tether’s market cap declined from $83.13 billion to $65.31 billion, while USDC’s market cap reached $56 billion before also declining. Centralized exchanges like Coinbase advised users to convert their USDT holdings to USDC, and Crypto.com even delisted USDT for Canadian users due to regulatory compliance concerns.
USDC’s popularity has grown as investors see it as a safer alternative to USDT. USDC’s assets are backed by cash or short-term US treasuries, and it undergoes audits by global accounting firm Grant Thornton. In contrast, Tether has faced criticism for not being transparent about its reserves or audits, leading some in the crypto community to question the accuracy of its reported trading volume for 2022. Some suggest that the high volume could be attributed to wash trading and have called for Tether to disclose more information about its financial health.
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