Best guess it doesn't really need a real executable peg since it provides such a convenient tax shelter to avoid realizing crypto gains. It's useful enough people are willing to ignore the issues and since it's backing isn't immediately examinable it gets to stay alive. On chain algorithmic pegs are vulnerable because their backing is immediately visible where Tether was able to just fake backing long enough to get deeply integrated into the crypto markets.
In most developed nations, capital gains tax applies even against "like-for-like" trades. The swap between crypto types triggers a capital gain event and resets your cost basis. So people using USDT to move funds between exchanges without paying taxes on their gains are probably asking for trouble.
USDT _IS_ a useful tool to facilitate quick movement of funds between exchanges without the delays and expense of the conventional financial system, though.
I'm not an accountant, and I'm not your accountant. Not financial advice.
Still waiting for the evangelists of unregulated free markets to explain why it doesn't trade at ninety-nine cents or less.