Tether's USDT is not just a dominant force in the crypto market—it is a financial lifeline for millions globally. Despite ongoing debates about its transparency and regulatory compliance, USDT has become the world's most widely used digital dollar. A landmark report by Artemis, Castle Island Ventures, and Dragonfly revealed that from January 2023 to February 2025, 31 companies processed a staggering $94.2 billion in real-world stablecoin payments. Nearly 90% of these transactions were conducted using USDT, representing genuine commercial activities like B2B settlements, remittances, and payroll processing.
This signals a fundamental shift: regulators may now need USDT more than Tether does.
The Unplanned Digital Dollar
In many parts of the world, USDT isn’t viewed as a speculative crypto asset. It functions as money. From Nigeria and Turkey to the Philippines and Lebanon, people use USDT to hedge against inflation, settle cross-border invoices, and send funds to family members. In regions with unstable currencies, capital controls, or broken banking systems, Tether fills a void that traditional finance has left open.
It achieves this not through partnerships with licensed banks or central authorities, but via decentralized networks—primarily Tron—which offer near-zero transaction fees and instant transfers. The same Artemis-led report highlights Tron as the leading blockchain for stablecoin transfers, especially for USDT, underscoring Tether’s market dominance in enabling frictionless transactions where they are needed most.
While regulated stablecoins like USDC prioritized compliance, Tether targeted areas with the strongest demand, moving quickly and building influence without waiting for approvals. Despite attracting significant regulatory scrutiny, USDT is now deeply embedded in the global financial infrastructure.
The UAE’s Approach: Recognition Without Full Embrace
In late 2024, the Abu Dhabi Global Market (ADGM) recognized USDT as an “accepted virtual asset,” but only on the Ethereum, Solana, and Avalanche networks. Notably, it excluded Tron-based USDT, even though Tron is Tether’s primary issuance network and the backbone of its global transaction volume.
This exclusion wasn’t merely technical—it was regulatory. ADGM’s decision reflects deeper concerns about Tron’s compliance standards and transparency. Ironically, Tron is the very network that has enabled USDT’s mass adoption, reinforcing Tether’s global dominance, particularly in cross-border commerce.
There’s a critical distinction in ADGM’s stance: while virtual asset service providers (VASPs) can offer USDT for trading and investment, it is not automatically approved for payments. For any foreign-issued stablecoin to be legally used for payments in the UAE, it must be registered with the Central Bank of the UAE under the Payment Token Service Regulations. This framework requires issuers like Tether to register, share whitepapers and off-chain data, and obtain specific approval for payment use cases.
As of mid-2025, Tether had not publicly registered under this framework. This means USDT is currently permitted only for investment purposes in the UAE—not for merchant payments, salary transfers, or other domestic payment applications.
In August 2024, Tether announced a partnership with Phoenix Group to launch an AED-linked stablecoin. However, sources close to the matter revealed that the collaboration never materialized. Tether is still seeking local partners, and UAE banks remain hesitant, likely due to compliance risks and the scrutiny associated with partnering with an entity frequently under the lens of global regulators.
Navigating the Legal Gray Area
All licensed exchanges in the UAE—including those regulated by ADGM and the Dubai Virtual Assets Regulatory Authority (VARA)—currently list USDT. They allow users to trade, hold, and convert USDT like any other crypto asset. But should USDT be delisted since it isn’t registered with the central bank?
The answer lies in regulatory nuance. Under current rules:
- Foreign-issued stablecoins can be offered for investment without registration.
- They cannot be used for payment purposes unless the issuer is registered.
Thus, exchanges offering USDT for investment are compliant. However, if any platform enables payment functionalities—such as merchant plug-ins, remittance channels, or payroll integrations—they would violate UAE law.
For now, UAE regulators seem to tolerate USDT’s presence in trading venues, as long as payment features are not activated. But this situation remains unstable and could change with evolving policies.
The Broader Regulatory Warning
On June 24, 2025, the Bank for International Settlements (BIS) issued one of its starkest warnings yet against stablecoins. In a report, the BIS labeled stablecoins as “an unsound form of money,” claiming they fail to fulfill key monetary functions like uniformity, resilience, and integrity. It specifically highlighted transparency concerns, pointing to Tether’s reserve management, and warned that large-scale liquidation of backing assets could trigger financial instability.
Beneath the warning, however, lies a deeper truth: central banks feel threatened. In countries where local currencies are volatile, banking infrastructure is weak, or remittance costs are high, USDT has become the de facto digital dollar. The BIS fears what it cannot control—and stablecoins, especially Tether, have grown beyond the immediate grasp of traditional institutions.
This reaction underscores that the real challenge isn’t just regulation—it’s relevance. Stablecoins have become a monetary gateway for the unbanked and underbanked. Even as central banks push for CBDCs and unified ledgers, they are playing catch-up with an already established reality.
This deepens a contradiction at the heart of global finance: the public has embraced USDT. Now it’s up to regulators—and even the BIS—to decide whether to collaborate with it, compete against it, or attempt to exclude it entirely.
The Deepening Contradiction
Tether remains unlicensed in many jurisdictions, yet it is the backbone of stablecoin commercial activity. It is the digital dollar of choice for millions. Even in regulated markets like the UAE, it occupies a legal gray area—traded but not fully accepted, indispensable yet not entirely endorsed.
For regulators, the challenge is clear: you can draft policies, issue licenses, and build alternatives. But until better solutions emerge, USDT will continue to do the work that others cannot.
This leads to an inconvenient truth: in today’s reshaping of global finance, regulators may need Tether more than Tether needs them—a testament to the entrenched dominance of USDT in the digital currency world.
Frequently Asked Questions
Is USDT legal in the UAE?
Yes, USDT is legally recognized for investment and trading purposes by the Abu Dhabi Global Market (ADGM). However, it is not approved for payment use, such as buying goods or transferring salaries, unless registered with the Central Bank of the UAE.
Why did ADGM exclude Tron-based USDT?
ADGM excluded USDT on the Tron network due to compliance and transparency concerns. While Tron facilitates low-cost and high-speed transactions, regulatory authorities have expressed reservations about its governance and oversight frameworks.
Can I use USDT to pay for services in the UAE?
No. Unless Tether registers with the Central Bank of the UAE under the Payment Token Service Regulations, using USDT for payments remains unauthorized. Businesses and individuals should use only approved payment tokens for transactions.
What is the status of Tether’s AED-linked stablecoin?
Tether’s planned partnership with Phoenix Group for an AED-pegged stablecoin did not materialize. As of mid-2025, there is no official launch, and Tether is still seeking local banking and regulatory partnerships in the UAE.
How does the BIS view stablecoins like USDT?
The BIS has criticized stablecoins as “unsound money,” citing deficiencies in transparency, stability, and regulatory compliance. It emphasizes that stablecoins do not meet the standards of traditional currencies and could pose risks to financial stability during crises.
Are there alternatives to USDT in the UAE?
Yes, other stablecoins like USDC and regulated payment tokens approved by the Central Bank of the UAE are alternatives. For seamless and compliant transactions, consider exploring advanced digital asset platforms that offer a range of authorized options.