Tether (USDT) Is Coming to Bitcoin (BTC) and the Lightning Network

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

Tether announced today that it will be 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.”

Tether's integration with Bitcoin will be both 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.

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.

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 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.

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.

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,