I haven't figured out exactly how it's used or who's buying it.

Is the concern that it could allow the US to do one last rugpull of the whole world of individual citizens buying US treasuries by defaulting?

Tether would keep its Bitcoin and the Tether owners would be left with nothing?

If this is the case, it is a risk taken by individuals that they trust the US more than Bitcoin.

They are allowed to make that risk assessment even through it is against their best interests IMO.

We just have to keep the US honest and paying its debts.

It's a huge market of people who make that assessment (against bitcoiners). In my Grinch-heart, I say they are betting against me, and I will take their future applications to work in Mi Empresa.