In a debate about USDT in a post, it is discussed whether saying that USDT is referenced to the dollar is right or wrong, DeepSeek says the following:

Yes, it is valid to say that USDT is "tied" to the dollar, but not in the traditional sense of a currency backed 100% by a government. It is more accurate to say that it is "linked" or "pegged" through a stability mechanism.

Additionally, it mentions the following:

✅ Why it is said that it is "tied to the dollar":

Design objective: The fundamental purpose of USDT (and stablecoins in general) is to maintain a 1:1 parity with the US dollar (USD). Its value should always be ~$1.

Redemption mechanism (Arbitrage): Tether Limited, the issuing company, promises (under certain conditions and fees) to redeem 1 USDT for 1 USD and vice versa. This creates a market mechanism: if USDT falls to $0.99, arbitrageurs buy it cheaply and redeem it for $1 with the company, causing the price to rise. If it rises to $1.01, they sell USDT to Tether for $1, causing the price to fall.

Declared backing (Reserves): Tether claims that every USDT in circulation is backed by equivalent reserves (assets such as cash, treasury bonds, etc.). Although there has been controversy regarding the transparency of these reserves, the intention is for the backing to exist.

⚠️ Why there is debate and nuances (The other side of the coin):

It is not a sovereign backing: The backing is not like that of a traditional fiat currency, guaranteed by a central bank and a government. It is a promise from a private company. This entails counterparty risk (the risk that Tether does not fulfill its promise).

History of controversies: Tether has faced legal and transparency issues in the past. In 2021, it reached a settlement with the New York State Attorney General (NYAG) for $18.5 million, accused of hiding losses and falsely claiming that its tokens were fully backed by dollars.

The backing is not 100% in cash: Tether's reserves include not only dollars in bank accounts but also other assets such as commercial paper (short-term corporate debt), bonds, precious metals, and even secured loans to third parties. This introduces liquidity and market risk.

Redemption is not direct for everyone: The process of redeeming large amounts of USDT for USD directly with Tether is not available to the average user; it is restricted to large institutional investors ("verified customers") with fees. Most users rely on exchanges (like Binance) to buy/sell at market price.

🟰 Conclusion: How to say it correctly?

To be precise, avoid saying "it is backed 1:1 by dollars in a bank" (because the reserves are mixed). Instead, you can use these phrases:

"USDT is a stablecoin pegged to the US dollar." (This is the most technical and correct.)

"Its value is designed to maintain a 1:1 parity with the USD."

"Tether tries to maintain parity through asset reserves and a redemption mechanism."

In summary: Saying that USDT "is tied to the dollar" is a colloquial and widely accepted way to describe its purpose in the crypto ecosystem. However, in a technical or critical discussion, it is crucial to understand and mention that this "pegging" is based on trust in a private company and its reserves, not on an absolute guarantee from a government, which entails inherent risks that do not exist with physical dollars.

I would like to open a debate on this position and thus learn more and also think about the use of this resource in Venezuela.