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. It is suspected that its stablecoin, USDT, may be used to finance 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.
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. It is suspected that its stablecoin, USDT, may be used to finance illegal activities such as drug trafficking, terrorism, cyberattacks, and money laundering by criminal organizations.
The investigation, led by the Manhattan US Attorney’s Office, focuses primarily on whether Tether has violated sanctions and anti-money laundering laws. As the investigation deepens, the 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 organization Hamas and Russian arms dealers.
In response to these allegations, Tether denies that the company is under investigation, stating that these reports are unfounded and merely “recycled rumors.” 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 monitoring of stablecoin transactions.
“If Tether is being investigated, the company would be aware of it. Therefore, based on this, it can be determined that the accusations in the article are completely false,” says Ardoino.
Over the years, Tether has been surrounded by controversy and has been associated with numerous controversial news stories. In addition to the aforementioned allegations of illegal activities, the reserve and transparency of Tether’s assets have also been points of contention.
However, according to the asset reserve details released 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 USDT’s peg
As the largest USD stablecoin in 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 seen as an alternative to the dollar and is a very ideal and 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 misuse by criminals, which often leads Tether to be involved in new events.
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 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, serves as Tether’s primary asset management partner and is responsible for managing its nearly $100 billion in US Treasury bonds.
Once sanctions take effect, Cantor Fitzgerald may be required to freeze these assets, and market experts believe that this will trigger a large-scale conversion of USDT to US dollars or other fiat currencies by users, further exerting pressure on the market.
Sources:
WSJ, Cointelegraph, Bloomberg