Holders who haven't applied for verification, or whose amount falls short of the minimum, are in practice using the secondary market: they sell to someone else in the market and get the market price at the moment of the sale. The $1 in an issuer's terms is paid to customers who redeem with the issuer directly.
Tether redeems USDT at $1 for its verified customers
Tether's Terms of Service state that to have Tether issue or redeem Tether Tokens, you must be a verified customer of Tether. Someone who bought USDT elsewhere and wants to use this channel has to apply to Tether for verification separately.
Tether may from time to time make redemptions through its website, subject to minimum redemption amounts and other requirements. Subject to compliance with the terms, the redemption price for one token is one unit of the fiat currency it is pegged to, less fees where applicable. For USDT that is 1 USD for 1 USDT.
USDT that never passes through this channel changes hands by holders trading with one another. The price is set by the bids and offers at the time, and it can sit slightly above $1 or below it. When USDT's market price moves away from $1, the redemption channel in the terms is still reserved for Tether's verified customers.
Tether's USDT redemption minimum, redemption fee and verification fee
Tether's Fees page sets out the cost of buying and redeeming directly in four items:
| Fee item | Amount |
|---|---|
| Minimum Tether Token acquisition or redemption amount | 100,000 USD |
| Fee per redemption | The greater of $1,000 or 0.1% |
| Fee per acquisition | 0.1% |
| Verification fee | 150 USD in Tether Tokens |
The minimum covers both directions: buying and redeeming each start at $100,000. A balance in the thousands or tens of thousands of USDT doesn't reach it. The verification fee is paid in USDT, 150 USD worth, and it is a separate item from the fee charged on each redemption.
The redemption fee is the larger of two numbers:
| Amount redeemed | Amount redeemed × 0.1% | Greater of that and $1,000 | Redemption fee ÷ amount redeemed | After the redemption fee |
|---|---|---|---|---|
| $100,000 | $100 | $1,000 | 1% | $99,000 |
| $1,000,000 | $1,000 | $1,000 | 0.1% | $999,000 |
| $2,000,000 | $2,000 | $2,000 | 0.1% | $1,998,000 |
The crossover is at $1,000,000. Below it, 0.1% comes to less than $1,000, so the flat $1,000 is charged, and the less you redeem, the larger the fee is as a share of the amount: at $500,000 it is 1,000 ÷ 500,000 = 0.2%, and right at the minimum it is 1%. Above $1,000,000 the fee is 0.1% and the share stops changing.
That share can be set against the market price. Take the same 100,000 USDT and sell it on the market for fiat: filled at $0.99 it brings $99,000, the same as redeeming directly after the redemption fee, and filled anywhere above $0.99, selling brings more. At 1,000,000 USDT the break-even price moves to $0.999. Both sides have other costs that aren't counted here: selling carries a trading fee, direct redemption carries the verification fee, and whatever the receiving bank charges isn't in this table either.
Buying has a single rate. At 0.1% of the amount bought, $100,000 of USDT costs $100 in acquisition fees. Redeem the same amount afterwards and you pay the $1,000 redemption fee, which makes $1,100 for the round trip.
The Fees page also says that withdrawal requests for digital tokens held by Tether are evaluated per request and can take several days to process. That refers to token withdrawals, not to how long US dollars take to reach a bank account.
Who is barred under Tether's Terms of Service?
In the Terms of Service, a Tether Tokens Wallet is the digital tokens wallet Tether provides to a user as the means for purchasing and redeeming Tether Tokens. The terms set out prohibitions for two groups.
U.S. Persons are prohibited from directly or indirectly holding, owning or operating a Tether Tokens Wallet or Tether Tokens in any way, or otherwise transacting on or using any Tether Tokens, the Site or any Services. One exception is written in: Eligible Contract Participants agreed by Tether are outside the prohibition, and whether Tether agrees is at its sole discretion.
Every Prohibited Person is strictly prohibited from directly or indirectly holding, owning or operating a Tether Tokens Wallet in any way, or otherwise transacting on or using the Services. Prohibited Person is a list set out in the definitions section of the terms. U.S. Persons are on it, and the remaining entries are drawn by country, territory and sanctions status.
Whether you fall into either group depends on the wording of those definitions and on the outcome of Tether's review. Before applying for verification, read the definitions of U.S. Person and Prohibited Person in full and check them against your own nationality and place of residence.
Redeeming USDC directly with Circle requires a Circle Mint account
Circle's USDC Terms apply only to holders of USDC located outside the European Economic Area (EEA); holders located in the EEA are referred to the USDC White Paper. The terms sort holders into two types by whether they have a Circle Mint account. Users with one are User Type A. Users who have no account but hold USDC are User Type B, and the terms still apply to their holding and use of USDC.
The redemption rules follow that split. Only Users Type A can redeem USDC directly with Circle, and a User Type B may not redeem with Circle unless and until they open a Circle Mint account. Redemption by a User Type A is conditional as well. It depends on holding a corresponding amount of USDC associated with a registered Circle Mint account, on there being no violation of the USDC Terms or the Circle Mint account User Agreement, and on there being no action by a regulator, law enforcement or a court that would restrict redemption.
On price, Circle (or an affiliate designated by Circle) commits to redeem 1 USDC for 1 USD, subject to the terms, applicable law, and any fees where applicable. As in Tether's terms, the $1 comes with fees attached.
Eligibility for and requirements related to opening a Circle Mint account are set out in the Circle Mint account User Agreement, and fees are listed on the USDC Fee Schedule.
FAQ
Is Tether's $150 verification fee refundable?
The verification fee is not refunded. Tether's Fees page notes that the 150 USD worth of USDT is non-refundable once paid but can be part of your redemption later, and that whether an account is approved is at Tether's sole discretion.
Does Circle guarantee that USDC is always worth $1 on other platforms?
Circle does not guarantee that the value of 1 USDC will always equal 1 USD on other platforms. The $1 applies to redemptions that Circle itself handles, less fees where applicable. Buying or selling on another platform, you get that platform's price at the time of the trade.