The U.S. government is investigating Tether, suspected of violating sanctions and anti-money laundering regulations
The U.S. federal government is investigating the stablecoin issuer Tether, suspected of violating sanctions and anti-money laundering (AML) regulations. According to a report by the Wall Street Journal on October 25, this criminal investigation is led by the Manhattan U.S. Attorney's Office, focusing on whether Tether's $USDT has been used by third parties to fund illegal activities such as drug trafficking, terrorism, hacking, and money laundering.
The accusation involves $USDT being used for illegal trading, triggering market panic
The investigation focuses on whether the $USDT stablecoin is widely used by individuals and organizations under U.S. sanctions, including the terrorist organization Hamas and Russian arms dealers. The U.S. Treasury is also considering sanctions against Tether, which could prohibit U.S. citizens and businesses from trading with the company. As the largest stablecoin by trading volume, $USDT has a daily trading volume of up to $190 billion, and this news has drawn widespread attention and shock from the market.
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Tether strongly denies the allegations, with the CEO calling the report 'old noise'
In response to the above allegations, Tether strongly denies them, calling the claims 'absurd.' The company stated in an official statement: 'The insinuation that Tether is involved in assisting criminals or evading sanctions is baseless.' Tether CEO Paolo Ardoino stated on social media: 'As we told the Wall Street Journal, there is no indication that Tether is under investigation. The Wall Street Journal is just repeating outdated noise.'
Image source: X Tether CEO Paolo Ardoino responds to media reports
Tether emphasizes that they are actively cooperating with U.S. and international law enforcement agencies to combat bad actors using $USDT and other cryptocurrencies for illegal activities. The company stated that the transparency of blockchain makes illegal use impractical, as all transactions are recorded on a public ledger, allowing authorities to trace and seize funds when necessary.
The market reacted strongly, with cryptocurrency prices falling
But after the news broke, the cryptocurrency market experienced severe volatility. Bitcoin's price dropped from $68,000 to $66,000, with a decline of over 3% within 24 hours. (As of the time of writing, Bitcoin's price is $66,788.) Other major cryptocurrencies such as Ethereum, BNB, and Solana also saw declines. Market analysts pointed out that the investigation into Tether could trigger a crisis of confidence in stablecoins, subsequently affecting the entire cryptocurrency ecosystem.
Image source: TradingView Bitcoin experienced severe fluctuations after news of Tether's investigation broke
However, some experts believe this may just be a short-term market reaction. Tether has faced multiple regulatory challenges in the past but has maintained operations. Additionally, Tether has stated that it has strengthened monitoring measures, collaborated with blockchain analysis companies, and frozen 1,850 suspicious crypto wallets, recovering about $114 million in assets. They have also expanded their lobbying team, hiring former senior executives from PayPal with digital currency regulatory experience, demonstrating a focus on compliance.
Further reading
Stablecoins are a killer application! An appreciation of the Tether documentary: A story about freedom
The road to $120 billion! Why did Tether succeed? What will the next decade look like?
Big issues with Tether? Consumer protection organizations warn: Tether's U.S. dollar reserves are opaque, just like FTX
Unregulated currency? Foreign media evaluate Tether: With Tether, everyone can use U.S. dollars
