There are easier paths, such as:

USDT -> kraken[1] -> USD -> your bank

or even

USDT -> bitfinex[2] -> your bank

[1] https://trade.kraken.com/charts/KRAKEN:USDT-USD

[2] yes they do allow fiat withdraws https://support.bitfinex.com/hc/en-us/articles/213919309-Fia...

Apart from the fact that there are transaction costs and time delays (it'll take about half an hour after you bought BTC on Binance that you can sell them on Coinbase), what guarantees that the BTC price is the same on Coinbase and Binance?

Well, arbitrage! But suppose BTC it is much higher on Binance. You'd then take USD and transfer them to Coinbase:

USD (Coinbase) -> BTC (Coinbase) -> BTC (Binance) -> USDT (Binance) -> ??

Now you need to take these USDT and turn them into USD, to keep the arb running. But that is precisely what doesn't work.

So: the chain you outline is NOT a way to "directly sell USDT for USD", as links can break down.

It's basically the difference between a fiat currency and one backed by something.

For example, something vaguely analogous would be:

[Setting: The Olden Days] GP: "I'm concerned because nobody has ever tried to take USD to the government and directly get silver/gold for it." You: "Why is the "directly" part here significant? If I can USD (My Pocket) -> USD (My Brokerage) -> Gold (My Brokerage) -> Gold (My Pocket), then whats the difference other than a few extra steps?"

The difference is that we never tested to see if the USD is actually backed by real gold.

You can't USD Binance. That's my point.