Disclaimer: I think Tether is shady, likely illegal, and would never use it myself. However, I think there is a perfectly reasonable explanation for where this Tether is coming from and why no existing Tether has ever been redeemed for USD.<p>First, understand that Tether and Bitfinex are the same people. Bitfinex has hundreds of millions of dollars in their accounts. It is likely that most or all of the Tether is bought directly by Bitfinex in order to satisfy Tether withdrawal requests. The money comes from USD deposits to Bitfinex.<p>When people want to convert Tether to USD, rather than redeeming from Tether.to directly, they send Tether back to Bitfinex, which credits it to their USD balance at a 1:1 rate. The USD can then be withdrawn as a wire transfer. Crucially, this process does not require that Tether be redeemed, because Bitfinex maintains a large balance of both USD and Tether. As long as Tether demand keeps increasing, Bitfinex can simply sit on the Tether they receive until it's time to hand it out to someone else doing a Tether withdrawal.<p>The only situation in which Tether would ever be redeemed is if there was a bank run on Bitfinex. As Bitfinex's USD reserves fell they would need to redeem the Tether that they hold for USD. So far, Bitfinex has not faced this situation and so no Tether has ever been redeemed.<p>So, I've described a way in which Tether could be relatively legitimate. Is that actually what's going on? Nobody knows except the management of Bitfinex. Personally, I don't trust them. The incentives for fraud are astronomical, and even if it's been entirely legit up to this point it's unlikely to remain so forever.