Stablecoins are now a cornerstone of the crypto ecosystem, but it wasn’t always this way. Today, USDT (Tether) dominates the market as the most widely used stablecoin, but back in its early days, it was largely ignored. In fact, for over two years after its launch, USDT struggled to gain traction. That all changed in 2017, when a series of pivotal events created the perfect storm for USDT’s explosive growth.
What transformed USDT from a niche experiment into the backbone of global crypto trading? And surprisingly, how did Taiwan play a crucial role in this turning point?
This deep dive explores the untold story of USDT’s first major product-market fit (PMF), uncovering the regulatory, technological, and market shifts that fueled its rise — and reshaped the future of digital finance.
The Humble Beginnings of USDT
When USDT was first introduced in 2014, it faced an uphill battle. At the time, buying Bitcoin with fiat currencies like USD or CNY through banks was relatively straightforward. As Winston Hsiao, Co-Founder and Group Revenue Officer at XREX, explains, there simply wasn’t a strong demand for a digital dollar proxy.
“Back then, people could easily deposit USD or CNY via bank transfers to buy Bitcoin. There was no urgent need for a stablecoin.”
Without a clear use case, USDT remained underutilized. It wasn’t until 2017 that three major developments converged to create the ideal environment for stablecoin adoption — and USDT was perfectly positioned to benefit.
Event 1: Fiat Gateways Shut Down — The Regulatory Crackdown
The first catalyst came from increasing regulatory pressure on cryptocurrency exchanges. In 2017, Chinese authorities began restricting capital outflows and cracking down on crypto-related financial activities. This led to the closure of major fiat on-ramps — bank channels that allowed users to deposit and withdraw local currency from exchanges.
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With traditional banking access cut off, traders needed an alternative way to move value in and out of exchanges. Enter USDT — a digital asset pegged 1:1 to the US dollar, operating independently of traditional banking systems.
This shift marked the beginning of what experts call the "demand purchase phase": users weren’t just holding USDT as a speculative asset — they were actively using it as a practical tool to preserve value and facilitate trades across borders.
Event 2: Binance Launches — The Rise of Pure Crypto Exchanges
The second key event was the launch of Binance in mid-2017. Unlike earlier exchanges that relied on fiat pairs (e.g., BTC/USD), Binance focused exclusively on crypto-to-crypto trading (e.g., BTC/ETH). This model reduced regulatory exposure and allowed for faster, more scalable operations.
However, without fiat pairs, traders lost a critical reference point: price stability. How could they measure gains or losses without a dollar equivalent?
USDT stepped in as the solution. By listing major trading pairs against USDT (e.g., BTC/USDT, ETH/USDT), Binance provided traders with a stable pricing benchmark — all while avoiding direct fiat integration.
This move normalized USDT as the de facto quote currency in crypto markets, accelerating its adoption across other platforms.
Event 3: Ethereum and the ICO Boom — A New Use Case Emerges
The third catalyst was the rise of Ethereum and the explosion of Initial Coin Offerings (ICOs). In 2017, Ethereum’s smart contract capabilities enabled startups to raise funds by issuing tokens directly to investors — often in exchange for ETH or BTC.
But there was a problem: volatility. Founders needed stable funding to manage budgets, while investors wanted predictable valuations.
USDT offered a way out. Projects began accepting USDT for ICO contributions, and investors used it to hedge against market swings. This created a new layer of utility — not just as a trading tool, but as a stable fundraising and accounting instrument.
The combination of Ethereum’s programmability and USDT’s stability laid the foundation for decentralized finance (DeFi) — years before DeFi became mainstream.
Taiwan’s Surprising Role in USDT’s Rise
So where does Taiwan fit into this narrative?
According to industry insiders, Taiwan-based traders were among the earliest and most active adopters of USDT during the 2017 bull run. With limited access to international banking services and strict capital controls in neighboring regions, Taiwanese traders turned to USDT as a reliable cross-border value transfer mechanism.
Moreover, many early crypto OTC (over-the-counter) desks in Asia began quoting prices in USDT, further cementing its role as a regional standard. This grassroots adoption helped validate USDT’s utility and contributed to its network effect across East Asia.
In essence, Taiwan became an unexpected testing ground for stablecoin usage — proving that demand existed even in markets with underdeveloped fiat infrastructure.
The Aftermath: Building the Infrastructure for Modern Crypto
These three events — fiat channel closures, the rise of crypto-native exchanges, and the Ethereum-powered ICO boom — collectively formed USDT’s first true product-market fit.
From 2017 onward, USDT’s market cap grew from under $100 million to over **$4 billion by 2019**, establishing it as the dominant stablecoin. More importantly, it demonstrated that digital dollars could function as a global, borderless medium of exchange — independent of traditional financial gatekeepers.
This shift also paved the way for future innovations:
- The development of algorithmic stablecoins
- The rise of DeFi lending protocols
- And the ongoing debate over centralized vs. decentralized money
Frequently Asked Questions
Why was USDT ignored at first?
Initially, users had easy access to fiat currencies through banks, so there was no urgent need for a digital dollar. USDT only gained relevance when those channels were restricted.
How did Binance help USDT grow?
By focusing on crypto-only trading pairs and using USDT as a pricing benchmark (e.g., BTC/USDT), Binance normalized stablecoin usage and boosted liquidity.
What made USDT suitable for ICOs?
Its price stability allowed projects to raise predictable amounts of capital and investors to assess valuations without worrying about crypto volatility.
Is USDT truly backed 1:1 by USD?
Tether claims full backing, though transparency has been debated. Reserves now include cash, cash equivalents, and other assets — not just physical dollars.
Could another stablecoin replace USDT?
While competitors like USDC offer greater transparency, USDT’s network effects, liquidity, and widespread adoption make it difficult to displace — despite ongoing scrutiny.
Why does Taiwan matter in crypto history?
Taiwan’s active trading community and early OTC adoption helped validate USDT’s real-world utility during a critical growth phase.
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The story of USDT is more than just about one token — it’s about how necessity drives innovation. When traditional systems fail, new solutions emerge. In 2017, USDT filled a void left by closed bank channels, fragmented exchanges, and volatile markets.
Today, stablecoins are integral to everything from remittances to decentralized lending. And while debates over regulation and transparency continue, one thing is clear: the era of digital dollars is here to stay.
As we look ahead to future product-market fits — perhaps in cross-border payments or central bank digital currencies (CBDCs) — the lessons from USDT’s 2017 breakout remain more relevant than ever.
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