Transaction costs, speed, the willingness of banks to do that kind of business, the assurity that banks will not panic and reverse transactions or shut the account down. Tether, until it inevitably explodes, just works.

The reality of modern business banking is that it works, effectively, on a whitelist basis. They don't just let a totally new business category open an account transacting millions per day just because they don't know of anything illegal.

I take your point that these are, under the hood, regulatory... but that doesn't really change that much.

We could reverse the questions. Why would an exchange prefer to hold tether than USD?

I fully agree with you on Tether, the company. I also agree that it has gone way past exchanges. That said, it is true that working within the normal financial system is extremely difficult for anything new, with big needs for financial services.