TLDR
- Tether expands USDT functionality to Bitcoin’s main network and Lightning Network, using Taproot Assets for seamless integration
- Integration announced at El Salvador conference combines Bitcoin security with Lightning’s rapid transaction capabilities
- Tether leads stablecoin market with $139.4B market cap, handling over $10T in 2024 transactions
- El Salvador amends Bitcoin Law to optional merchant acceptance amid Tether’s relocation to the country
- Implementation aims to improve global payments and remittances through enhanced network capabilities
Tether revealed plans to bring its USDT stablecoin to Bitcoin’s network infrastructure during an announcement at El Salvador’s Plan B conference on January 30, 2025. The update will enable USDT transactions on both Bitcoin’s main network and its Lightning Network extension.
The technical foundation for this integration relies on Taproot Assets, a specialized protocol that Lightning Labs created in 2023. This protocol allows digital assets like USDT to operate within Bitcoin’s ecosystem while taking advantage of Lightning Network’s faster processing capabilities.
Users will soon have access to quicker USDT transactions through this dual-network approach. The system combines the trusted security measures of Bitcoin’s main network with the rapid processing power of the Lightning Network, creating a more versatile payment system.
Lightning Labs, the company behind the Taproot Assets protocol, sees this integration as a turning point for digital payments. CEO Elizabeth Stark highlighted how this development opens Bitcoin’s secure network to millions of potential users who want to send dollars globally.
The move aligns with Tether’s growing influence in digital finance. Recent market data shows USDT’s total value at $139.4 billion, making it the largest stablecoin by a wide margin. Its closest rival, USD Coin (USDC), currently holds $53.1 billion in market value.
Transaction volumes tell an impressive story of USDT’s adoption. Throughout 2024, the stablecoin processed more than $10 trillion in on-chain transactions. This volume approaches Visa’s yearly payment processing of $16 trillion, showing stablecoins’ growing role in global finance.
Paolo Ardoino, Tether’s CEO, emphasized the practical benefits of this integration. He pointed to improvements in remittance services and everyday payments, noting how the combination of speed and reliability serves real-world financial needs.
The announcement carries extra weight given its timing and location in El Salvador, where Tether recently moved its operations. However, the same day brought changes to El Salvador’s crypto policies, as the Legislative Assembly updated the country’s Bitcoin Law.
This amendment changed Bitcoin’s status in El Salvador, making its acceptance by merchants voluntary rather than required. The change came as part of negotiations with the International Monetary Fund regarding a $1.4 billion economic support loan.
The technical implementation promises to make small payments more practical and cost-effective. By operating across both Bitcoin’s main chain and Lightning Network, USDT transactions can be processed more efficiently while maintaining security.
Market experts point to broader implications for Bitcoin’s Layer-2 technology adoption. The integration could help Bitcoin compete more effectively with other blockchain networks that currently handle large volumes of stablecoin transactions.
Some analysts suggest this development could support new use cases, including potential applications in artificial intelligence. The Lightning Network’s speed could enable AI systems to process Bitcoin-based transactions more effectively.
The implementation retains Bitcoin’s decentralized nature while adding new capabilities through Taproot Assets. This approach allows for expanded functionality without compromising the network’s core security features.
Recent developments in Europe have created challenges for Tether, with some trading platforms removing USDT due to new regulations. These changes partly motivated Tether’s move to El Salvador’s more welcoming regulatory environment.
Tether continues to manage questions about its reserve holdings, maintaining that it properly backs its stablecoin supply. The company points to its substantial treasury holdings as evidence of its financial stability.
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