Well the general idea is that these stablecoins are far easier to trade than actual USD. Dealing with fiat balance can be tricky for some exchanges, so they would prefer to keep your fiat and track your balance with altcoins instead. This way, they're also technically not keeping your money for you. These are basically strictly for trading purposes and have little use otherwise, meaning inflation isn't an issue.

The issue has always been that they can simply be printed out of thin air without repercussions (if they're pegged to the USD, their supply and demand won't dictate their value), unlike actual fiat, if operated without transparency. If Tether had been transparent and open to audits, their reputation would be far better.