Tether Denies Government Investigation Experts Warn of Sanctions Impact on 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 for suspected use of its stablecoin USDT 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 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 for suspected use of its stablecoin USDT to finance illegal activities, such as drug trafficking, terrorism, cyber attacks, and potential money laundering by criminal entities.
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 individuals and organizations subject to US sanctions, such as terrorist group Hamas and Russian arms dealers.
In response to these accusations, Tether denies that the company is under investigation, stating that these reports are baseless and merely “rehashing old stories.” Tether’s Chief Technology Officer, Paolo Ardoino, states that the company has been actively cooperating with global law enforcement agencies to combat illegal activities and has helped recover approximately $109 million in illicit funds since 2014, while also strengthening monitoring of stablecoin transactions.
“If Tether is being investigated, 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 plagued by numerous controversies. In addition to the aforementioned allegations of illegal activities, concerns about Tether’s asset reserves and transparency have also been a focal point of controversy.
However, according to the asset reserve details disclosed by Tether, the company holds approximately $100 billion in US Treasury bonds, over 82,000 bitcoins (worth about $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 is a highly 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 affect the traditional financial market.
If the government imposes sanctions, it could result in 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, serves as Tether’s primary asset management partner and is responsible for managing its nearly $100 billion worth of 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 putting pressure on the market.
Sources:
WSJ, Cointelegraph, Bloomberg