Tether Bets on Emerging Markets as Stablecoin Battle Heats Up


Tether is making inroads in emerging markets as competition intensifies with rival stablecoin issuer Circle.

The largest cryptocurrency after Bitcoin and Ether, Tether’s USDT has long been the main stablecoin, a type of digital token pegged to a real asset, such as the dollar. But USDT’s dominance has recently come under pressure. Rival USD Coin (USDC), issued by

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and Fidelity-backed Circle, is taking increasing market share amid unanswered questions about Tether’s warranty.

Against this backdrop, Tether is stepping up its game in emerging markets, launching a token pegged to the Mexican peso on Thursday.

“There is a great need for stablecoins in emerging markets,” said Paolo Ardoino, CTO of Tether. Barrons.

“You’re talking to people from Turkey, Argentina, Venezuela, Brazil, and Senegal… Tether has never spent a dime on marketing there, but they’re all using Tether,” Ardoino says. “You can go to the hairdresser, you can buy houses, you can pay for any service or you can buy Tether.”

Ardoino estimates that over 50% of USDT continues to be used in conventional crypto trading, but 20%-30% of Tether tokens are circulating in emerging markets as a form of alternative currency. With $72 billion in circulation on Friday, according to CoinMarketCap, 20-30% of Tether issuance would be between $14 billion and $22 billion.

The head of Tether said that USDT in emerging markets is purchased directly from major exchanges, such as Binance or


in addition to local options such as Latin American Bisto, not directly from the company. Trading companies can buy and redeem USDT from Tether directly as so-called authorized participants, but most individuals buy and sell the token on secondary markets such as exchanges.

Stablecoins and Tether play a fundamental role in the crypto-economy, acting as the foundation for digital asset liquidity, trade, and lending. Tether’s daily trading volumes are regularly double those of Bitcoin. But following the collapse of Terra, a stablecoin that fueled a $400 billion crypto market rout earlier this month, the company has come under renewed scrutiny over its transparency.

Tether claims to back each token with $1 in cash or cash equivalents, but periodic “insurance reports” detail significant holdings of commercial paper, foreign debt, and digital tokens, raising questions about whether it is fully guaranteed.

The pressure on Tether accelerated as the token briefly lost its own peg two weeks ago. The token traded at a discount of up to 5 cents on the dollar, although authorized participants said the redemption process for $1 never faltered.

Tether’s market capitalization, which is the number of USDT tokens in circulation, fell by more than $10 billion in two weeks, from $83 billion to $72 billion, as money flowed into its rival, the USDC. The market capitalization of the token issued by Circle grew from $48 billion to $53 billion over the same period.

“There is very clearly a flight to quality,” Circle CEO Jeremy Allaire says in an interview with Barrons.

“We’re a regulated company, it’s been a regulated product for four years, we now provide transparency on a weekly basis,” Allaire says. “That’s what the market wants. The market understands that it is actually stable. I think people literally vote with their dollars.

For his part, Ardoino doesn’t seem to care too much about USDC gaining ground.

“If Tether becomes the second largest stablecoin, that’s good,” says Ardoino. He articulates a vision of Tether not as an alternative to money sent by bank transfer from big corporations, but rather as a way to help people in emerging markets gain access to hard currency.

“If ultimately Fidelity wants to put all of its assets in USDC, there’s no way for us to compete. But also I don’t care. That’s not our business model,” Ardoino says. It’s not just about the money.”

While El Salvador and the Central African Republic have both adopted Bitcoin – which is highly volatile – as a form of legal tender, little is known about the footprint of stablecoins in emerging markets.

International Monetary Fund (IMF) officials warned last month that the more widespread use of cryptocurrencies in emerging markets “could undermine domestic policy objectives” in its annual Financial Stability Report.

At the same time, there is still much to be done to extend an alternative form of banking and payments to economically less developed countries. In 2017, some 1.7 billion adults were “unbanked,” without an account at a financial institution or mobile money provider, according to the latest World Bank research.

“You would want to be careful about that. But at the same time, you want to understand that there’s a significant problem for people who aren’t connected to a bank-like system and have the ability to make simple payments,” says Bryan Routledge, professor of finance at Carnegie Mellon University.

“I may be skeptical of the Tether business model as to whether it’s fully supported or not, but you can see the opportunity as a policy maker to assess this with fresh eyes.”

Write to Jack Denton at [email protected]


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