Tether shifts focus to European, Middle Eastern and African markets in the face of US legal troubles

Tether (USDT) is showing signs of shifting to European, Middle Eastern, and African markets, due to regulatory constraints in the United States. USDT remains highly active as its supply grew past $120B. However, the token’s legal status is being questioned again. 

Tether’s USDT is more widely used in European, Middle Eastern, and African markets, as revealed by on-chain data. The leading stablecoin recently showed it is still making adoption headway in Northern and Eastern Europe, but on-chain activity shows a different regional profile. 

Tether estimates up to 330M wallets will use USDT globally, with the majority of usage concentrated in developing countries. Tether, Inc. has stated it will target more alternative chains with cheap transactions to tap these developing markets. 

Tether’s USDT is a popular USD alternative

Chainalysis revealed increased activity during daytime hours, potentially emerging from Russia, Iran, Rwanda, and Turkey. These regions coincide with countries outside the Global West, which coincidentally also have more crypto adoption rates.

USDT continues to replace BTC and ETH as payment tools due to its fixed price and more intuitive trading. The biggest concerns for USDT usage are the possibilities for terrorism financing and transfers in scams. 

The recent activity investigation by Chainalysis precedes the news of a renewed investigation against Tether, Inc. The USDT issuer denied being under investigation by US authorities after the news caused a minimal slide under the $1 peg. 

Tether, Inc. also released its quarterly report, showing its conservative investments are adequate. Tether reported $6B in excess reserves, with the rest of USDT backed by conservative investments of mostly US Treasury bills, with the inclusion of gold for some of its other RWA tokens. The bull market in the past decade helped USDT grow from a small position into one of the biggest tools for settlement in the crypto market.

Notable caveats to note with the data is that the recent usage information may depend on the blockchain tracked, which could imply a limited snapshot of activity. Also, USDT wallets are not limited by region and can be opened from anywhere in the world. DEX and DeFi activity is also not time-bound, as it can be tied to bot trading. 

Using USDT to bypass sanctions has been a long-term suspicion. USDT on TRON is one of the assets carrying the largest transactions, and has been tied to attempts at breaking capital controls laws in China. USDT users on TRON make up 87% of all transfers, but Ethereum still carries the bulk of transactions for each user. 

Ethereum-based USDT is the most widely used version in DeFi and on exchanges. Both chains are globally available and permissionless, but Ethereum remains the more established one in terms of liquidity and adoption.

USDT is also widely used on the Toncoin chain, which has been tied to activities in Eastern Europe. However, not all USDT uses are illegal. Recently, the stablecoin’s Toncoin version was even added to the Mobee payment app.

USDT remains a centralized exchange staple  

Decentralized usages for USDT include DeFi, as well as DEX swaps. USDT is also used as a direct payment tool, available through Telegram apps, decentralized marketplaces, and other fintech services. 

When it comes to centralized trading, USDT remains one of the key assets for liquidity and moving coins between exchanges. USDT is actually a hub for forex swaps and moving from fiat to crypto. The most active pair for USDT is against the US dollar. The two other most active pairs are the Korean Won and the Euro. 

The peak activity against fiat shows that USDT is also key for the intuitive dollarization of the crypto market, as most prices are quoted and understood in USDT. 

USDT is still available for simple trading on Binance, although it has been phased out of some products for the Euro Area. The end of 2024 will bring even stricter Euro Area regulations, which may diminish USDT usage for official payment gateways in Europe. 

For legalized and transparent use cases, USDT has been replaced by Circle USD (USDC), which is also turning into a key multi-chain asset. In the past month, USDC surpassed Tether’s USDT in terms of supply growth, adding 959.4M tokens. Over the same time period, the supply of USDC has grown by 792.4M tokens.