Tether Returns to Bitcoin with New RGB Protocol

Tether (USDT) is making a return to Bitcoin, the blockchain where it first launched its stablecoin in 2014. This month, Utexo, a Tether-backed infrastructure company, plans to issue USDT on Bitcoin using the RGB protocol. This new version aims to support private transfers, direct swaps between Bitcoin and USDT, and loans backed by native Bitcoin. The company also intends to extend support to the Lightning Network after the initial launch.

USDT initially launched on Bitcoin's Omni Layer in 2014, but as the stablecoin ecosystem expanded, Tether shifted its focus to other blockchains like Ethereum and Tron. By 2023, usage of USDT on Omni had declined, leading Tether to stop minting and redeeming the legacy version. The new RGB protocol addresses some of the issues that made the old Bitcoin version less attractive, such as privacy and data storage.

RGB keeps transaction details between parties rather than recording them directly on Bitcoin's blockchain. This approach could make USDT transfers more private and efficient. However, freezing individual addresses, as is possible on Ethereum and Tron, is not straightforward with RGB. Instead, Utexo plans to blacklist UTXOs linked to sanctioned or illicit activity, preventing affected USDT from being redeemed or transferred.

Currently, about $92.7 billion of the roughly $184 billion in USDT is on Tron, making it the largest network for the stablecoin. Ethereum holds another $73.4 billion. The success of the new Bitcoin version will depend on whether exchanges, wallets, and payment providers integrate it, similar to how Tron became USDT's largest network through user adoption.