Expert Discusses The Problem With Tether’s Fragmented Stablecoin Infrastructure

• Tether now operates the USA₮ stablecoin alongside the USDT.
• A crypto and Web3 expert argued that the fragmentation of Tether’s stablecoin products runs contrary to what traders want.
• He recommended unifying the two stablecoins to strengthen their liquidity and offer users a seamless experience in their stablecoin transactions.

Tether recently made a big move in the US market. The largest stablecoin issuer launched the USA₮ on Friday, a fully-compliant stablecoin product for American users. The event coincided with former White House cryptocurrency adviser Bo Hines’ appointment as Tether USA₮’s CEO.

Tether fully backed the USA₮ with 1:1 reserves in cash and US Treasuries, aligning with the requirements of the GENIUS Act. This is unlike the USDT, the world’s largest stablecoin by market cap, which integrated other assets in its backing. It’s also subject to the mandatory US reporting, audits, and licensed custodian rules under the new law.

With Tether’s revamped stablecoin regime, it now has the USA₮ targeting the US market, and the USDT for the rest of the world. Despite the significant progress made in its stablecoin game, Anton Golub, Chief Business Officer of Freedx, believes Tether’s measure contradicts what users really want.

ADVERTISEMENT## A Fragmented Liquidity Pool in Tether’s USA₮ and USDT

According to Golub, Tether is dominating the market with $13 billion profit last year. It has also become the 18th largest holder of US Treasuries, surpassing South Korea’s US treasury portfolio. However, he claimed traders prefer only a single deep liquidity pool for US dollar-based stablecoins.

The FreedX exec warned that Tether having separate products for a USD stablecoin only translates to a weaker depth, fragmented markets, and reliance on bridges for the assets. This will result in a decline in liquidity efficiency as spreads widen.

With that, Golub explained that Tether must center its endgame on establishing a unified dollar stablecoin. It means the issuer should have a single stablecoin that’s compliant everywhere to ensure its liquidity is not siloed.

ADVERTISEMENT## A Merger of Tether’s US Dollar Stablecoins

Golub claimed that the statistics focusing on the use of US dollar stablecoins in retail payments are inconsequential in terms of their trading volume. He pointed out that the primary factor influencing 99% of stablecoin flows is transactions from hedge funds, prop shops, and market makers moving liquidity between exchanges.

All these institutional players want depth, speed, and fungibility for their stablecoin assets, not fragmentation. Given these facts, the USA₮ must ultimately integrate with the USDT for Tether’s unified global standard.

ADVERTISEMENT