For one, currencies are issued and backed by sovereign nations generally, and recognized as legal tender somewhere. USDT is not on either count, as far as I am aware.

It might technically count as a ‘crypto ecosystem currency’ since it is often used to exchange value between different chains/coins/exchanges. But it is very difficult to convert to a recognized currency, so a lot of folks also get unknowingly stuck with it thinking they have dollars. There is a reason USDT is the ticker they pushed for, not TETH or whatever.