Tether To Introduce USDT To Bitcoin And The Lightning Network #CriptoNews

On Jan 30, 2025, at the inaugural PlanB Forum in El Salvador, during a fireside chat with Tether CEO Paolo Ardoino and CEO of Lightning Labs, Elizabeth Stark, Tether announced it is bringing USDT to Bitcoin and the Lightning Network.

The move follows Tether’s emphasis on aiming to support the Bitcoin ecosystem; as Tether CEO Paolo put it, “Tether is committed to driving innovation in the Bitcoin ecosystem.”

USDT on Bitcoin Announcement Details

Tether announced its plan to integrate USDT into Bitcoin, specifically on-chain and on Bitcoin’s Lightning Network to take advantage of its instant, low-cost transactions.

The integration on Bitcoin’s Lightning Network will be via the Taproot Assets protocol developed by Lightning Labs, which was made possible by Bitcoin’s Taproot upgrade. Through this protocol, Tether can issue USDT over the Lightning Network and allow Bitcoin software and services to integrate and interact more seamlessly with USDT.

It will still take some time before there is a critical mass of Bitcoin software and services that adopt this change, as they will need to support the underlying Taproot Assets protocol either through the use of Lightning Labs LND software or other Lightning Network clients and Software Development Kits (SDKs) that support it.

Nevertheless, as part of Tether’s next steps for this integration, Bitfinex will be issuing and making USDT available. Tether and Lightning Labs say they will continue working together to ensure a seamless path to adoption and support for users and developers.

Lightning Lab’s Bitcoin Taproot Assets Protocol

Back in April 2022, less than a year after the activation of Bitcoin’s Taproot upgrade, Lightning Labs announced that it had developed a protocol on the Lightning network—Taproot Assets—that would allow for the issuance and transfer of assets such as USDT over the Lightning network.

The protocol allows for both fungible (e.g., stablecoins) and non-fungible assets (e.g., NFTs and collectibles) to be issued and transferred without disrupting the normal functioning of Bitcoin on-chain or lighting channels—as intermediary nodes do not need to upgrade or opt-in, only what are known as “Edge Nodes” are aware of Taproot Assets and handle them accordingly. Nevertheless, the protocol allows these Taproot Assets to be transferred on-chain or via the Lightning Network.

Since Lightning Labs’ Taproot Assets protocol announcement, with the help of the broader Lightning developer community, they have been improving, testing, and integrating this protocol into their suite of products and developer toolchains, with over 177,000 taproot assets minted on-chain so far.

This protocol’s introduction resurfaced community discussions around opening up a pandora’s box of further tokenization and similar token frenzies and scams in the broader crypto space into the Bitcoin ecosystem and the consequences for Bitcoin’s unique value proposition, ethos, principles, and user experience.

Stablecoins on Bitcoin

Following the announcement of Bitcoin as a legal tender in El Salvador in June 2021, it also highlighted a growing need for access to stablecoins, which, in response, Lightning Labs decided to create the Taproots Assets protocol a year later. This trend of growing interest in stablecoins across emerging markets has been on a steady incline, with reasons ranging from tighter controls on US Dollar access from governments implementing currency controls to satiating the present demand for accessing US Dollars given its role as the backbone of traditional financial rails.

Tether, the world’s largest issuer of stablecoins, who recorded a profit of over $13 billion in Q4, 2024 (making them likely the most profitable company per employee), has over the years continued to invest significantly in the Bitcoin ecosystem, from through various initiatives and investments.

“By enabling USDT on the Lightning Network, we are not only reinforcing Bitcoin’s foundational principles of decentralization and security but also creating practical solutions for remittances, payments, and other financial applications that demand both speed and reliability.”—Paolo Ardoino, Tether CEO.

By bringing USDT to Bitcoin, Tether will introduce its 350 million global users to the most liquid, cheap, and instant global monetary network—Bitcoin. Similarly, it provides its stablecoin users in emerging markets with access to Bitcoin, given the interoperability permitted by the Lightning Network.

With the ability to leverage Bitcoin’s Lightning Network, USDT will gain from the interoperability across the Bitcoin ecosystem and provide cheap instant payments in regions such as Africa and LATAM, where the demand for USD-based stablecoins is exceedingly high.

While stablecoins have mostly been on chains such as Ethereum and Tron, these networks are often slow, expensive, and come with various trade-offs; stablecoins on Bitcoin will benefit from its decentralized and robust network—and in principle, stablecoins on Lightning offer final settlement, instant low-cost payments, and scalability without compromising Bitcoin’s decentralization.

Implications For The Bitcoin Ecosystem

“Today marks a new era for stablecoins. Bringing USDT to Bitcoin combines the security and decentralization of Bitcoin with the speed and scalability of Lightning. Millions of people will now be able to use the most open, secure blockchain to send dollars globally. It all comes back to Bitcoin.”—Elizabeth Stark, Lightning Labs CEO.

With USDT volume reaching $10 trillion in 2024, roughly 60% of Visa’s annual volume, this integration would bring a significant portion of these volumes to the Bitcoin ecosystem and Tether’s millions of users worldwide.

Relatedly, having USDT on Bitcoin does come with the potential of increased fees that Bitcoin Miners, Lightning Network routing nodes, and other service providers could accrue from all this activity.

A New Era For Bitcoin Financial Products and Services

Bitcoin wallets and payment companies such as Bitnob and Jan3’s Aqua wallet servicing users have integrated USDT, given the spike in stablecoin adoption (particularly USDT), where, according to Chainalysis, in 2024, it accounts for 43% of all crypto volume in Sub-Saharan Africa, alone.

However, this integration typically involves complex setups, from supporting alternative chains like Tron and Lightning Network swaps (BTC to USDT) to using sidechains like Blockstream’s Liquid, which introduce risks and fragility to their stack. USDT being integrated directly into Bitcoin means developers and businesses can more easily integrate USDT without dealing with complex integrations that often bleed into user experience and introduce pain points.

Bitcoin As the Leading Stablecoin Platform and Its Consequences

While the integration of USDT on Bitcoin means we could see Bitcoin closing the gap on alternative chains leading in USDT volumes, it could become the leading chain for USDT.

Moreover, accessing USDT more directly in the Bitcoin ecosystem will unlock novel applications and services. Both retail and institutional players will have the opportunity to explore the intersection of global instant micropayments, remittance, and cross-border settlement using a stable financial instrument—USDT—and further push the DeFi component of Bitcoin’s ecosystem from Bitcoin lending to other financial products and services.

Notwithstanding, this may come at a cost, as the introduction of USDT volumes and activity on-chain may also see fees rise and affect user experience. More importantly, on the Lightning Network, the higher need for liquidity due to these new flows may encourage further centralization of Lightning Network Service Providers (LSPs) to those with the capacity to support the USDT flows and, separately, may degrade the overall performance and reliability of the Lightning Network.

Further, DeFi brings into question Bitcoin going beyond its core purpose of providing a network that facilitates global settlement via its native asset—bitcoin—an invaluable tool to millions worldwide and potentially Billions in the future.

Taproot Assets and USDT on Bitcoin

Beyond the issuance of USDT from Bitfinex, builders looking to interact with Taproot Assets on Lightning can do so via the latest releases of the litd suite or popular Lightning Network developer tool, Polar.

Users who want early access to Taproot Assets can look to Joltz, one of the only self-custodial lighting wallets supporting Taproot Assets. Joltz also offers an SDK for developers.

Additionally, businesses looking to get a head start at integrating USDT on Lightning can look to Voltage. The Lightning Network infrastructure company provides infrastructure and services such as liquidity provision and management to interact with and build on Taproot Assets.

The Future of USDT on Bitcoin

What is left to see is the kind of dynamics USDT on Bitcoin introduces, from payment trends, potential unintended implications, and other side effects that will come as more companies, Lightning Network Service Providers (LSPs), exchanges, wallets, and SDKs integrate it.

Regardless of both the criticism and praise surrounding this announcement, it marks the beginning of a new era underscored by Bitcoin’s growing maturity as a global monetary network and how its ecosystem will navigate continuing to serve the global market amid the undeniable growing demand for having access to cheap global instant USD payments, especially in emerging markets.

As Bitcoin continues to serve as a critical lifeline, alternative global rail, and settlement network for the digital age, we can expect if it is to remain as such to contend with these kinds of developments that will either buttress its antifragility or highlight the limitations of these additions.

With this move, Bitcoin could become an even more critical global financial rail as it will support two large and growing markets: those seeking a global money, financial freedom tool, and the most liquid, secure asset—Bitcoin—and those seeking cheap access to holding and moving US Dollars globally.