USDT’s New Move on Bitcoin: Swaps Without an Exchange
Tether-backed Utexo aims to bring USDT to the Bitcoin network, enabling users to swap BTC for USDT without an exchange and borrow against their Bitcoin.
Speaking to CoinDesk, Utexo co-founder Viktor Ihnatiuk said the company had received a commercial license to issue USDT on Bitcoin. Tether CEO Paolo Ardoino also announced the plan to return, saying it was “coming home.” Under the new infrastructure, Tether-backed Utexo will handle USDT issuance.
USDT began its journey in 2014 on the Omni protocol on Bitcoin. Over time, Ethereum and Tron became its main networks for use. Now, a different usage model is being developed on Bitcoin for the stablecoin, which has a market capitalization of approximately $190 billion.
Borrow without selling Bitcoin, swap without using an exchange
Utexo’s plan focuses on three main use cases: more private USDT transfers, direct swaps between BTC and USDT, and borrowing against Bitcoin. The direct swap option aims to eliminate the need for users to conduct transactions through an exchange when moving between BTC and USDT.
For borrowing, the goal is to let users use their Bitcoin as collateral without converting it into representative tokens on another blockchain. This would allow them to borrow without switching to an asset representing Bitcoin on another network, such as WBTC.
The company plans to develop the software infrastructure needed for exchanges, wallets, and payment providers to offer these services.
Transfer details won’t be public
The RGB protocol is at the center of the infrastructure. Under this approach, transaction details are kept off-chain between the parties, while ownership of the asset is tied to Bitcoin’s UTXO records, known as unspent transaction outputs. The Bitcoin network is used to cryptographically prove ownership.
This model aims to provide greater transaction privacy than the publicly accessible balance and transfer records on Ethereum and Tron.
Blacklisting instead of freezing
The privacy model will also work differently when it comes to sanctions. Utexo says it cannot directly freeze RGB assets as it could an address on Ethereum. Instead, it plans to blacklist UTXOs linked to sanctions or illegal activity and share the list with exchanges and other service providers.
According to Ihnatiuk, assets linked to these records will not be able to be sent back to bridges or token issuance tools, or withdrawn to Ethereum or Tron.
After issuing on Bitcoin, the company’s goal is to expand the system to the Lightning Network, which is designed for faster, lower-cost payments. At this stage, the aim is also to allow transaction fees to be paid in USDT.