Tether Denies Government Investigation Experts Warn of Sanctions Impacting USDT Stability

What happened?
According to The Wall Street Journal, stablecoin issuer Tether is currently under investigation by the US Department of Justice and the 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 lead to the freezing of Tether’s assets, 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 the 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 organizations and individuals subject to US sanctions, such as the terrorist group Hamas and Russian arms dealers.
Tether denies the allegations and claims that the reports are baseless and merely “recycled old news.” Paolo Ardoino, the CEO of Tether, states that the company has been actively cooperating with global law enforcement agencies to combat illegal activities and has assisted in the recovery of approximately $109 million in illegal funds since 2014, while strengthening the monitoring of stablecoin transactions.
“If Tether were under investigation, the company would be aware of it. Therefore, based on this, it can be confirmed that the accusations in the article are completely false,” says Ardoino.
Over the years, Tether has been associated with numerous controversies. In addition to the aforementioned allegations of illegal activities, Tether’s asset reserves and transparency issues have also been a focus 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 emphasizes that these assets are sufficient to support the stability of USDT.
Government sanctions may affect the stability of the USDT peg
As the largest USD stablecoin in terms of global trading volume, Tether has a daily trading volume of up to $190 billion and a market capitalization exceeding $120 billion.
Its stable value pegged to the US dollar is seen as an alternative to the dollar and a very convenient trading tool in many areas where the use of the US dollar is prohibited by the US. However, it is not without the abuse of criminals, which leads Tether to be involved in a new event 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 affect traditional financial markets.
If the government imposes sanctions, it could lead to the freezing of Tether’s assets, 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 the sanctions take effect, Cantor Fitzgerald may have to freeze these assets, and market experts believe that this will trigger a massive conversion of USDT into dollars or other fiat currencies by users, putting further pressure on the market.
Source:
WSJ, Cointelegraph, Bloomberg