US government investigates Tether for alleged violations of sanctions and anti-money laundering regulations
The US federal government is investigating the stablecoin issuer Tether for alleged violations of sanctions and anti-money laundering (AML) regulations. According to a Wall Street Journal report on October 25, this criminal investigation is led by the Manhattan US 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.
Allegations involve $USDT used for illegal trading, causing market panic
The focus of the investigation is whether the $USDT stablecoin is widely used by individuals and organizations under US sanctions, including the terrorist organization Hamas and Russian arms dealers. The US Treasury is also considering sanctions against Tether, which could prohibit US citizens and businesses from transacting with the company. As the largest stablecoin by trading volume globally, with a daily trading volume reaching $190 billion, this news has garnered widespread attention and shock in the market.
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Tether strongly denies allegations, CEO calls reports 'old noise'
In response to the allegations, Tether strongly denies, calling these claims 'absurd.' The company stated in an official statement: 'The suggestion that Tether is involved in aiding criminals or evading sanctions is unfounded.' 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 old noise.'
Image source: X Tether CEO Paolo Ardoino responds to media reports
Tether emphasizes that they actively cooperate with US 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.
Market reaction is severe, cryptocurrency prices drop
But after the news broke, the cryptocurrency market experienced severe fluctuations. Bitcoin's price fell from $68,000 to $66,000 at one point, dropping over 3% within 24 hours. (As of press time, Bitcoin's price is $66,788) Other major cryptocurrencies like Ethereum, BNB, and Solana also saw declines. Market analysts pointed out that the investigation into Tether could trigger a confidence crisis in stablecoins, potentially impacting the entire cryptocurrency ecosystem.
Image source: TradingView Bitcoin experienced severe fluctuations after news of Tether's investigation
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 analytics firms, and frozen 1,850 suspicious crypto wallets, recovering approximately $114 million in assets. They have also expanded their lobbying team, hiring former senior executives from PayPal with digital currency regulatory experience, showing a commitment to compliance.
Further Reading
Stablecoins are killer applications! A review of the Tether documentary: A story about freedom
The road to $120 billion! Why has Tether succeeded? What will the next decade look like?
Is Tether in trouble? US consumer protection organizations warn: Tether's dollar reserves are opaque, just like FTX
Unregulated currency? Foreign media evaluate Tether: Through Tether, everyone can use dollars
