Tether Chooses Arbitrum to Power Its USDT0 Crosschain Stablecoin

Tether, the world’s largest stablecoin issuer, is making strategic moves to enhance its infrastructure and user accessibility amid evolving regulatory landscapes. The company recently announced its investment in Zengo Wallet, a self-custodial wallet utilizing multiparty computation (MPC) technology, to strengthen the security of decentralized asset storage. At the same time, Tether has selected Arbitrum as the infrastructure provider for its new crosschain stablecoin, USDT0, aiming to improve liquidity and interoperability across major blockchain networks. 

Tether Selects Arbitrum as Key Infrastructure Provider for USDT0 Crosschain Stablecoin

Tether, the issuer of the world’s largest stablecoin USDt, has chosen Arbitrum to serve as the infrastructure provider for its newly launched crosschain stablecoin, USDT0. This strategic partnership aims to enhance liquidity, scalability, and interoperability across multiple blockchain networks, further strengthening Tether’s dominance in the stablecoin market.

According to a Feb. 11 announcement, Arbitrum One will act as the central hub connecting USDT0 to various blockchain ecosystems, including Ethereum, Tron, Telegram Open Network (TON), and Celo. Tether will leverage Arbitrum’s Legacy Mesh technology, an innovative solution designed to facilitate seamless stablecoin transfers between these networks, reducing fragmentation and enhancing efficiency.

Steven Goldfeder, CEO of Offchain Labs—the developer behind Arbitrum—highlighted the importance of this integration, stating that the Legacy Mesh technology enables “deep, liquid markets regardless of the blockchain” used. The implementation is expected to accelerate USDt adoption and expand the stablecoin’s accessibility across decentralized finance (DeFi) platforms and traditional financial applications.

Tether’s USDt remains the most widely used stablecoin, with a total market capitalization exceeding $141 billion, according to CoinMarketCap. Its closest competitor, Circle’s USD Coin (USDC), holds a significantly smaller market share at $59 billion.

Tether’s dominance extends beyond individual stablecoins, accounting for over 61% of the global stablecoin market, which is currently valued at approximately $230 billion. With USDT0 designed as a crosschain solution, the company aims to further solidify its leadership position by improving liquidity and increasing the efficiency of cross-border transactions.

USDT0 was first deployed on Jan. 16 in collaboration with LayerZero, with its initial integration occurring on Ink, the scaling solution developed by crypto exchange Kraken. This move signaled Tether’s increasing focus on crosschain capabilities, allowing stablecoin users to move funds effortlessly across different blockchain networks without relying on third-party bridges.

While regulatory scrutiny and competition from emerging stablecoin projects pose challenges, Tether continues to demonstrate its financial strength. In 2024, the company reported record-breaking profits of $13 billion, largely fueled by its extensive holdings of US government bonds.

By the end of the year, Tether’s US Treasury portfolio had grown to an estimated $113 billion, a sum surpassing the reserves of 17 sovereign nations. The company’s ability to generate significant revenue from interest-bearing assets while maintaining its dominance in the stablecoin market shows its financial resilience and strategic positioning.

Stablecoins and the Future of Remittances

Beyond DeFi and institutional adoption, stablecoins are transforming the global remittance industry. A December report by blockchain analytics firm Chainalysis highlighted how stablecoins, including USDt, are providing cost-effective solutions for cross-border payments.

The study found that sending a $200 remittance using stablecoins from Sub-Saharan Africa is approximately 60% cheaper than traditional fiat-based methods. This efficiency is driving increased adoption of stablecoins in developing regions, where access to traditional banking services remains limited.

Tether’s selection of Arbitrum as its primary infrastructure provider for USDT0 signals a major shift toward blockchain-agnostic financial solutions. By eliminating barriers between different networks and improving liquidity efficiency, Tether aims to position itself as the backbone of a truly interoperable digital asset ecosystem.

As regulatory frameworks around stablecoins continue to evolve, Tether’s ability to adapt and innovate will be crucial in maintaining its market leadership. The success of USDT0’s crosschain capabilities will be closely monitored by both industry players and policymakers, as it represents a significant step toward a more connected and scalable digital financial ecosystem.

Tether Invests in Zengo Wallet Amid Rising EU Regulatory Challenges

In related news, Tether has also made a strategic investment in Zengo Wallet, a self-custodial cryptocurrency wallet leveraging multiparty computation (MPC) technology. The move comes at a critical time as Tether faces increasing regulatory scrutiny in the European Union (EU), particularly under the Markets in Crypto-Assets (MiCA) framework.

In an announcement shared on Feb. 11, Tether confirmed an undisclosed investment in Zengo, which will help the wallet enhance its features and expand support for Tether’s stablecoins across major blockchain networks.

“Tether is committed to delivering reliable and secure tools that empower users to take control of their digital assets. Our investment in Zengo reflects that commitment,” said Paolo Ardoino, CEO of Tether.

Launched in 2019, Zengo has gained popularity as a self-custodial cryptocurrency wallet that eliminates traditional seed phrase vulnerabilities. Instead, it utilizes MPC cryptography, which enhances security by distributing key fragments across different locations, ensuring that users remain in full control of their assets.

According to Zengo, the wallet has served over 1.5 million users worldwide without a single instance of hacking, phishing, or unauthorized access. The company’s approach offers an added layer of protection, making it an attractive alternative for users looking for a safer way to manage their digital assets.

Tether’s investment comes at a time when USDt is facing mounting regulatory pressure in the EU. Under MiCA regulations, several centralized exchanges have been forced to delist USDt, limiting its accessibility to European users. However, self-custodial wallets like Zengo offer a viable alternative by allowing users to store and transfer stablecoins without reliance on third-party intermediaries.

Ardoino has been vocal about his concerns regarding the EU’s regulatory stance, warning that overly restrictive policies could lead to a fragmented and disorderly crypto market. While exchanges may face restrictions in offering certain stablecoins, self-custodial solutions ensure that users retain access to digital assets without compliance hurdles imposed by centralized platforms.

The debate over self-custody has intensified in recent years, with regulators and banking institutions raising concerns over potential risks, including illicit transactions and loss of consumer protections. However, industry leaders argue that self-custodial wallets empower users and promote financial freedom.

In November 2024, the central bank of Brazil proposed banning stablecoin transactions to self-custodial wallets such as MetaMask, citing concerns over money laundering and unregulated financial flows. Critics argue that such restrictions will only accelerate the shift toward decentralization, as users seek ways to bypass traditional financial controls.

A Strategic Move for Tether’s Future

Despite increasing regulatory headwinds, Tether continues to thrive, maintaining its dominance in the stablecoin sector. USDt remains the most widely used stablecoin, significantly outpacing its closest competitor, Circle’s USD Coin (USDC).

By investing in Zengo, Tether is not only strengthening its infrastructure but also positioning itself for long-term resilience in a rapidly evolving regulatory landscape. The integration of USDt with a self-custodial wallet aligns with the broader industry shift toward decentralized financial solutions and ensures that stablecoins remain accessible even in regions facing regulatory uncertainties.

As global regulators continue to shape policies around stablecoins and self-custody, Tether’s move shows the importance of decentralized solutions in maintaining financial sovereignty. With an increasing focus on user security and accessibility, the investment in Zengo represents a step toward a more robust, self-custodial financial ecosystem.

While centralized exchanges may be forced to comply with stringent regulations, self-custodial wallets provide an alternative path for users seeking greater control over their assets. Whether this trend will lead to broader adoption of decentralized finance (DeFi) or further regulatory pushback remains to be seen, but Tether’s latest move signals a commitment to ensuring stablecoin accessibility in the face of evolving challenges.