What is USDT? How Tether's stablecoin works

USDT is a dollar stablecoin issued by Tether, redeemable one to one for US dollars by the issuer's direct customers, and backed by a reserve that is mostly short-dated US Treasury bills and overnight repo, with a minority in gold, bitcoin and secured loans. It is the largest stablecoin by a wide margin: about 183.5 billion tokens in circulation on September 17, 2026, according to Tether's own transparency feed, against about 73.7 billion for USDC.

For a payments operator in Latin America, USDT matters for a reason that has little to do with its balance sheet: it is the token the counterparty already holds. Retail and over-the-counter liquidity in Argentina, Colombia, parts of Mexico and much of Brazil runs on USDT, mostly on the Tron network. This post explains what backs it, where it lives, how it differs from USDC and its reserve, and when a treasury should not use it. If stablecoins in general are new, start with what a stablecoin is.

What the reserve holds, according to the latest assurance report

Tether publishes a quarterly reserves report with an assurance opinion from BDO Italia under the ISAE 3000 (Revised) standard. The most recent, dated June 30, 2026 and published on Tether's transparency page on July 31, 2026, reports the following for the issuing entity, Tether International S.A. de C.V.:

Tether reserves as of June 30, 2026, BDO Italia assurance report, US dollars, rounded.

Two readings of the same table. The conservative one: 140.6 billion, about 75 percent of the reserve, is cash-equivalent Treasury exposure with maturities under 90 days, and the reserve exceeds liabilities by about 4.1 billion, so the token is fully backed even if the non-Treasury positions were marked down by a quarter. The skeptical one: about 47 billion sits in assets that a US money-market fund could not hold, including 13.45 billion of secured loans to counterparties Tether does not name, and the report is an assurance opinion on a point-in-time snapshot, not an audit of the company. Both readings are correct. The difference between USDT and USDC is not whether the backing exists; it is how much of it is outside the Treasury market.

The report also notes one open class action in New York courts relating to bitcoin prices in 2017 and 2018, for which no provision is recognized. That is the kind of line a compliance lead reads and a marketing page omits.

How much USDT exists and where it lives

Tether's transparency feed on September 17, 2026 showed about 193.6 billion USDT authorized across all networks, of which about 10 billion sat in Tether's treasury wallets as authorized but not issued. Net circulation by network:

USDT in circulation by network, Tether transparency feed, September 17, 2026, issued minus treasury, rounded.

Half of all USDT lives on Tron. That single fact shapes Latin American payments more than anything in the reserve table. Tron transfers cost a few cents and confirm in about three seconds, which is why exchanges, OTC desks and remittance apps across the region standardized on it years ago. When a Colombian platform says it "pays in dollars", it usually means USDT on Tron. When a Mexican importer's supplier in Shenzhen asks for stablecoin, the same.

Ethereum holds the other half, at higher fees, and is where the largest institutional flows and redemptions happen. USDC, by contrast, has almost no presence on Tron since Circle wound down support there in 2024. So the token decision and the network decision are the same decision in this region: if the counterparty is on Tron, the token is USDT.

Who can redeem, and how the peg has held

Tether redeems USDT for dollars directly for verified customers, and its published fee schedule sets the minimum acquisition or redemption at 100,000 dollars, with a redemption fee of the greater of 1,000 dollars or 0.1 percent. Everyone else sells on an exchange or through a provider that holds a Tether account. The structure is the same two-tier arrangement USDC uses, and the redemption channel has been tested in public. In the week Terra's UST collapsed in May 2022, Tether said it was honouring redemptions normally and was processing more than 2 billion dollars that day ("Tether Continues to Honour All Redemptions from Verified Customers During Market Volatility", May 12, 2022). Two weeks later it put the total at 10 billion dollars of redemptions inside a single week, which it described as over 12 percent of the tokens then outstanding ("Stress Tests, Resiliency and Bank Runs", May 31, 2022). The claims are Tether's own, and they are the only figures either side has published; what an operator takes from them is that the redemption channel absorbed a run of that size without closing.

The regulatory position is different from Circle's, and worth stating plainly. The issuer is Tether International S.A. de C.V., a company incorporated under the laws of El Salvador and authorized there as a stablecoin issuer by the National Commission of Digital Assets, per the Relevant Information Document it filed on February 20, 2026. USDT is not issued under the United States framework created by the GENIUS Act (Public Law 119-27, enacted July 18, 2025), and it is not authorized as an e-money token under the EU's MiCA regulation (Regulation (EU) 2023/1114). On January 17, 2025 ESMA told national regulators to have crypto-asset service providers end their services for non-compliant tokens to European clients by the end of the first quarter of 2025, which is why USDT pairs left EU-facing venues that year. For a Latin American operator paying into Brazil or Mexico that is mostly irrelevant, because the fiat leg is regulated locally whichever token arrives. For a European payer it decides which token the compliance team will accept.

Where USDT fits in a Latin American payment flow

Paying out of the region to a counterparty that wants USDT: a Brazilian exporter collects reais and converts to USDT on Tron to pay a supplier in Asia who will not take a wire. This is the flow that made Tron the default rail in the region.

Paying into the region from a USDT balance: a platform holding USDT pays contractors or sellers in Brazil or Mexico. The provider quotes reais or pesos against USDT, receives the tokens on Tron or Ethereum, and pays out over Pix (Brazil's instant payment system, run by the Central Bank) or SPEI (Mexico's interbank transfer system, run by Banxico). Our USDT to BRL corridor page and USDT to MXN corridor page show the live rate and the networks accepted.

Treasury. Some Latin American companies hold USDT rather than USDC because their bank of last resort is a local exchange whose dollar liquidity is USDT. That is a liquidity decision, and it is the right one for them, as long as the treasury knows what the reserve table above says.

When USDT is the wrong token

When the payer or its bank is in the European Union and the compliance team applies MiCA. USDC or a euro stablecoin will pass; USDT will generate a question the treasurer does not want to answer.

When the counterparty is a US institution that requires a GENIUS Act payment stablecoin. Same logic.

When the treasury's policy caps exposure to non-Treasury reserve assets. About a quarter of the USDT reserve sits outside Treasury bills and repo. A policy written for money-market funds will not accept that, and the policy is not wrong.

When the flow is domestic. A Mexican company paying a Mexican company should use SPEI. Putting USDT in the middle adds a spread and two conversions.

And, as with every stablecoin, when the payment must be reversible. A USDT transfer on Tron is final in seconds. A refund is a new payment.

What a USDT payout looks like on Lumx

Lumx is stablecoin payments infrastructure for businesses that move money between Latin America and the rest of the world: one API to collect, hold, convert, and pay out in BRL, MXN, COP, USD, EUR, and GBP or in USDC and USDT, over local rails such as PIX, SPEI, PSE, ACH, FEDWIRE, SEPA, and Faster Payments, with SWIFT and on-behalf-of payments and collections (POBO and COBO) in USD, EUR, and GBP, plus named virtual accounts, custodial wallets, and KYB/KYC built in.

For USDT specifically, we accept and pay out on Tron, Ethereum and Polygon against BRL, MXN, USD and EUR; the current pair list per network is on the coverage page and the corridor pages linked above. Tron is the network most of our USDT volume arrives on, because that is where our clients' counterparties already are. A client sends USDT to its custodial wallet, requests a quote against BRL or MXN, and receives the payout over Pix or SPEI, normally within minutes of the blockchain confirmation. Compliance holds and bank rejections arrive as webhook events with a reason code, so the finance team sees why a payout is waiting rather than discovering it a day later.

I was against adding Tron. My argument was the reserve table above: why route client money over the network of the token with the messier balance sheet when USDC on Polygon did the job. The clients answered the question for me. A remittance client lost a corridor to a competitor because its Argentine partner would only settle in USDT on Tron, and a second client asked us, politely, whether we wanted their volume or our preferences. We added Tron. I still think USDC has the better reserve, but the payout leg goes where the counterparty is, and in this region that is Tron.

Methodology and sources

Reserve figures come from the BDO Italia assurance report dated June 30, 2026, published on tether.to/en/transparency on July 31, 2026 and downloaded as PDF on September 18, 2026; amounts are rounded to two decimals in billions of US dollars. Circulation by network comes from Tether's transparency data feed queried on September 17, 2026, computed as tokens authorized minus tokens held in Tether's treasury wallets per network. USDC figures for comparison come from Circle's issuance API on the same date. Redemption minimums and fees come from tether.to/en/fees, read on September 18, 2026. The 2022 redemption figures are Tether's own, from the two posts linked above, and no independent verification of them exists. Incorporation and Salvadoran authorization come from the Relevant Information Document dated February 20, 2026 at tether.to/en/public. The GENIUS Act is Public Law 119-27, enacted July 18, 2025; the MiCA reference is Regulation (EU) 2023/1114, and the supervisory deadline is ESMA's statement ESMA75-223375936-6099 of January 17, 2025. Figures change quarterly; the stablecoin glossary has stable definitions.

Verified on September 18, 2026. Operational context, not legal, tax, or investment advice.

Cover photo: CHUTTERSNAP on Unsplash.