What happened?
According to The Wall Street Journal, stablecoin issuer Tether is currently under investigation by the US Department of Justice and Treasury Department, suspecting that its stablecoin USDT may be used to fund illegal activities.
Tether denies the allegations and states that the company has been actively cooperating with global law enforcement agencies to combat illegal activities.
Experts point out that if the government imposes sanctions, it could result in Tether’s assets being frozen, directly impacting the stability of USDT’s peg to the US dollar.
The Wall Street Journal reports that Tether is under investigation by the US government
According to a report published by The Wall Street Journal on October 25th, stablecoin issuer Tether is currently under investigation by the US Department of Justice and Treasury Department, suspecting that its stablecoin USDT may be used to fund illegal activities such as drug trafficking, terrorism, cyber attacks, and money laundering.
The investigation, led by the Manhattan US Attorney’s Office, focuses on whether Tether has violated sanctions and anti-money laundering laws. As the investigation deepens, the US Treasury Department is also considering imposing sanctions on Tether, as its stablecoin is widely adopted by entities and individuals subject to US sanctions, such as the terrorist organization Hamas and Russian arms dealers.
Tether denies these allegations and claims that the reports are baseless and only a “rehash of old stories.” Paolo Ardoino, the CEO of Tether, stated that the company has been actively cooperating with global law enforcement agencies to combat illegal activities. Since 2014, they have helped recover approximately $109 million in illegal funds and have strengthened monitoring of stablecoin transactions.
“If Tether is under investigation, the company would know about it. Therefore, based on this fact, it can be confirmed that the accusations in the article are completely false,” said Ardoino.
Over the years, Tether has been involved in numerous controversies and has always been surrounded by controversy. In addition to the aforementioned allegations of illegal activities, Tether’s asset reserves and transparency issues have also been a focal point of controversy.
However, according to the asset reserve details published by Tether, the company holds approximately $100 billion in US Treasury bonds, over 82,000 bitcoins (approximately $550 million), and 48 tons of gold. Ardoino emphasized that these assets are sufficient to support the stability of USDT.
Government sanctions may affect the stability of USDT’s peg
As the largest USD-pegged stablecoin in terms of global trading volume, Tether has a daily trading volume of up to $190 billion and a market capitalization of over $120 billion.
Its stable value pegged to the US dollar is considered an alternative to the dollar and is a convenient trading tool in many regions where the use of the US dollar is prohibited by the United States. Of course, it is not without the abuse by criminals, which leads Tether to be involved in new events from time to time.
According to Bloomberg, Hilary Allen, a law professor at a US university, warns that if USDT collapses, it will have a devastating impact on the entire cryptocurrency economy and may even spill over into traditional financial markets.
If the government imposes sanctions, it could result in Tether’s assets being frozen, directly impacting the stability of USDT’s peg to the US dollar. Cantor Fitzgerald, a US financial services company, is Tether’s main asset management partner responsible for managing its nearly $100 billion in US Treasury bonds.
Once sanctions take effect, Cantor Fitzgerald may have to freeze these assets, and market experts believe that this will trigger a large-scale conversion of USDT into US dollars or other fiat currencies by users, further putting pressure on the market.
Sources:
WSJ, Cointelegraph, Bloomberg
