Tether, the operator of the stablecoin USDT, is reportedly under scrutiny by U.S. federal investigators for potential sanctions and anti-money-laundering violations. However, Tether CEO Paolo Ardoino dismissed the claims, labeling the allegations as “old noise.”
U.S. Investigation into Tether’s Role in Sanctions and Money Laundering
The U.S. attorney’s office in Manhattan is leading an inquiry into whether Tether’s services may have been utilized by third parties to facilitate illegal activities, such as drug trafficking, terrorism, and cybercrime. The Treasury Department has also considered imposing sanctions on Tether due to its alleged usage by sanctioned groups, including Russian arms dealers. If imposed, sanctions would bar U.S. citizens from conducting business with Tether.
As the world’s most traded cryptocurrency, with daily transactions exceeding $190 billion, Tether’s stable value appeals to regions where direct U.S. dollar transactions are restricted. The stablecoin has drawn increasing attention due to alleged associations with activities that pose national security risks, such as North Korea’s nuclear ambitions and Mexican drug cartels.
Tether Strengthens Compliance Amid Scrutiny
In response to these allegations, Tether clarified that accusations linking it to criminal activities are “outrageous.” The company highlighted its collaboration with U.S. and international law enforcement, noting blockchain’s public transparency aids in surveillance efforts. Recently, Tether froze 1,850 wallets, reclaiming $114 million in assets, and expanded its monitoring efforts by partnering with analytics firms Chainalysis and TRM Labs. Additionally, Tether bolstered its regulatory team by hiring a former PayPal digital currency specialist to enhance government relations.
Tether CEO Refutes WSJ Report
Reacting to the WSJ article, Tether CEO Paolo Ardoino firmly stated that there is “no indication that Tether is under investigation,” dismissing the report as speculative. A Tether spokesperson echoed this sentiment, criticizing the WSJ for publishing “reckless allegations” without confirmed sources. They added that the report overlooked Tether’s documented efforts to prevent misuse of the stablecoin for illicit activities.
Concerns Over Tether’s Financial Stability and Transparency
Consumer advocacy groups, including Consumers’ Research, have voiced concerns about Tether’s operations. Notably, Tether has yet to conduct an independent audit of its reserves despite promises since 2017. S&P Global recently assigned Tether a “4 out of 5” stability rating, signaling potential risks. A letter from Consumers’ Research urged state governors to scrutinize Tether, likening its lack of transparency to the factors that led to the collapses of FTX and Celsius.
Since June, Consumers’ Research has investigated Tether, alleging connections to Russian and Chinese authorities, as well as ties to terrorist organizations and drug cartels. Reports indicate Tether’s use in circumventing sanctions in nations like Venezuela and Russia.
The WSJ also highlighted Tether’s rise as an “incognito dollar” facilitating unregulated capital flows with transaction volumes surpassing Visa. Despite concerns, Tether reported significant 2023 profits of $6.2 billion, a figure that has only intensified concerns over its impact on financial systems and national security.
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