The exchanges don’t have any USD. They never did and they don’t have banking relationships to process USD anyway.
As to why anyone would hold USDT especially when there are better alternatives? They wouldn’t. But it’s not redeemable (Tether claim it is but it’s never actually been proven).
Fiat goes in. Tether comes out. And that’s irreversible. It’s an amazing scam.
Until that point, people seem happy to consider USDT equivalent to USD (and that may never change)
USDT is issued by Tether so if it is used by Binance, Binance would have had to buy it, assumingly from the fiat that went in.
Exchanges use Tether because they don’t have banking and can’t accept USD. So the USD has to find its way to Tether by some other mechanism. They claim it’s institutions, which is absurd. No institutional investor would ever give billions to an unaudited offshore entity when they can send fiat directly to legit exchanges. Michael Saylor himself says no institutions are using Tether.
So where do the Tethers come from? Maybe it’s not a fraud. But the answer should be very simple, and yet they cannot explain it.