Ethereum News Today: Tether U-Turn: Prioritizing Growth Over Legacy Chains

Tether has reversed its decision to freeze USDT smart contracts on five blockchain networks, including Omni, Bitcoin Cash SLP, Kusama, EOS, and Algorand , opting instead to discontinue direct issuance and redemption while allowing existing tokens to remain transferable [1]. The move comes after community feedback from members of these ecosystems, which Tether said influenced its revised strategy [1]. Users on these chains will still be able to transfer USDT, but the company will no longer provide official support for these tokens [1]. The initial plan, set for Sept. 1, would have entirely frozen these contracts, a change Tether now sees as unnecessary given the feedback and the broader focus on expanding USDT support on chains with strong developer ecosystems and user adoption [1].

Tether’s decision aligns with its ongoing emphasis on supporting blockchains with active and growing user bases and viable use cases, particularly for payments and stablecoin activity. Tron and Ethereum remain the two largest ecosystems for USDT, with $80.9 billion and $72.4 billion in circulation, respectively [2]. BNB Chain ranks third with $6.78 billion in USDT, while Solana and Ethereum’s layer-2s like Arbitrum and Base also show significant activity, though they tend to rely more on Circle’s USDC [2]. Tether’s strategic pivot reflects the growing dominance of Tron in the stablecoin payment space, driven by low fees, fast transactions, and exchange defaults favoring TRC-20 over ERC-20 [1].

The move is most impactful for the Omni Layer, which holds $82.9 million in USDT circulation—the highest among the affected chains—while other networks like EOS and Bitcoin Cash SLP have much smaller holdings of under $5 million [1]. Tether had already begun phasing out support for these chains over the past two years, starting with Omni, Kusama, and Bitcoin Cash SLP in August 2023, followed by EOS and Algorand in June 2024 [1]. This gradual sunset has allowed users and developers to transition to more active and scalable networks, reinforcing Tether’s commitment to efficiency and user experience [1].

The broader stablecoin market has continued to grow, with a total market cap of $285.9 billion as of the latest data. USDT and USDC are the largest stablecoins, with market caps of $167.4 billion and $71.5 billion, respectively [2]. Analysts anticipate further expansion, with the U.S. Department of the Treasury forecasting the stablecoin market could reach $2 trillion by 2028 [2]. The recent passage of the GENIUS Act under President Donald Trump is expected to bolster the U.S. dollar’s position as the dominant reserve currency by promoting dollar-pegged stablecoins [2].

Tether’s updated strategy also positions the company to remain compliant with evolving global regulations, including the EU’s MiCA framework and Hong Kong’s Stablecoin Bill, which emphasize transparency, reserve backing, and consumer protection [1]. While the decision to retain transferability but discontinue issuance and redemption on these chains may not significantly alter the competitive landscape, it reflects a nuanced approach to balancing innovation with operational efficiency. As new payment-focused chains and layer-2 solutions emerge, Tether’s flexibility in adapting to these developments will be key to maintaining its leadership in the stablecoin sector.