The capitalization of the USDT stablecoin is up more than 10% since the beginning of the year, reaching $100 bln. Will USDT be able to compete with the dollar? And how would this change the market?
The increase in USDT capitalization over $100 bln is certainly impressive, but so far it’s a drop in the bucket compared to the dollar market and dollar reserves held in various countries. To truly compete with the dollar, USDT would have to overcome major hurdles of trust and recognition at the government level.
At this point, it’s unlikely that USDT will be able to realistically compete with the US dollar as the world's reserve currency for a number of reasons:
1. The US dollar holds reserve currency status due to the high level of confidence in the US financial system and economy by governments, companies and investors around the world. USDT does not have the same longstanding reputation and credibility on the global level. It is used for the convenience of crypto exchanges.
2. Issuance of the dollar is regulated and controlled by the US Federal Reserve, an authoritative and influential central bank. USDT is issued by Tether, a private company, which raises doubts about the reliability and transparency of its issuance.
3. The dollar is the main currency in international payments around the world. It has maximum liquidity, while USDT has a limited scope of application mainly in the crypto industry.