This is a crucial insight. Looks like Tether's money laundering function has outgrown its Bitcoin pumping function.
Bitcoins aren't THAT great for escaping capital controls. They are volatile. You need an account at an exchange, AND a bank account (meaning KYC & AML) to cash out. https://twitter.com/jp_koning/status/1298217046757400576

Whereas Tethers are stable in price, and thanks to their centralised nature, you can deal easily in size. Moreover, as there are people behind USDTs who organise the trade, you know where to turn if something goes wrong.
But why does the amount of USDTs outstanding is growing?

In theory, if USDTs were just to play their function of "liquidity provider" for transferring funds, you wouldn't need much of them.
People in China looking to transfer his money out of China, would just buy some USDTs with CNY, and sell them a minute later for USD in the US.

USDTs would be created, then destroyed a minute later. No bagholders. But this never happens. USDTs are created, but never destroyed. Why so?
Because transferring funds out of China isn't about writing numbers in a database (this is why Ripple's "model" is an absolute joke).

You actually need someone to buy USDTs on the other end, with real USDs. But why would anyone buy USDTs, in exchange of USDs? Apart from laundering USDs, there's absolutely no reason for that. And of course, the guy in China doesn't want dirty USDs in exchange of his CNYs.

The whole purpose of laundering money is to get CLEAN money on the other end. But noone would buy USDTs with CLEAN USDs.
And this is why the amount outstanding of USDTs is growing. People are trying to launder money through Tether, but there's no way out. So... why do they do it?

Because USDTs is a store of dirty value. The guys running Tether tell their clients "hey, look, we're working on getting legit. Soon this all crypto thing will be recognised and regulated and you'll be able to cash out because institutional money is coming. Just wait a bit".

Tether is accumulating billions on CNYs in China - which they lend to miners to settle their electricity bills. People trying to escape Chinese capital controls are funding Bitcoin mining, in exchange of USDTs they can't cash out, but are convinced that one day, soon, they will.

Tether has managed to find a way to fund Bitcoin mining by positioning USDTs as a store of dirty value, for people stuck with CNYs who can't get out of China. They have created this image of stability, with a theoretical possibility of cashing out, one day, for clean USDs.

If you ask me, it's brilliant. Unsustainable, as always with crypto, but it was always about just surviving one more day. USDTs are stable, because Tether has a death grip on all the exchanges - who have to maintain the peg, or go bust. But there's no collateral, only illusion.