USDT issuer Tether has once again taken center stage as the Wall Street Journal reveals a possible ongoing investigation by the US Department of Justice into its activities suspected of fueling illicit transactions. Paolo Ardoino, Tether's CEO, dismissed the accusations, saying they were just “old rumors.”
Tether in the sights of American justice?
New troubles for Tether? The Wall Street Journal attacks the USDT issuer againthe stablecoin by far the most capitalized in the ecosystem. A market capitalization today exceeding $120 billion, making USDT the only stablecoin neck and neck with Bitcoin and Ether, eternal leaders of the crypto market.
According to the Wall Street Journal publication dated October 25, The U.S. Attorney’s Office for the Southern District of New York – the Department of Justice – has been investigating Tether’s activities since “ several years ».
Claims from anonymous sources cited by the American daily, according to which USDT would, among other things, finance “ Hamas and Russian arms dealers “. Money laundering and other “ illicit activities » are also mentioned in the publication.
Paolo Ardoino, historic spokesperson for Tether, quickly reacted on saying there was no evidence the company was under investigation by the U.S. Department of Justice.
As we told WSJ there is no indication that Tether is under investigation. WSJ is regurgitating old noise. Full stop.
— Paolo Ardoino 🤖🍐 (@paoloardoino) October 25, 2024
“As we told the WSJ, there is no indication that Tether is under investigation. The WSJ is just rehashing old rumors. Period. »
Factually, there is no indication that Tether is actually under investigation by any agency. However, the repeated attacks by American regulators against the main firms in the ecosystem such as Coinbase, Kraken or Consensys, prove that this is far from impossible.
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“ It is irresponsible for the WSJ to publish articles with such reckless allegations with such certainty, when no authority has officially confirmed them and no sources are named, » indicates a publication on the Tether blog.
Brad Garlinghouse, the CEO of Ripple (which plans to issue its own stablecoin), said in a May 2024 podcast that it was clear to him that the US government was after Tether, without elaborating his remarks.
In 2021, Tether was forced to pay $41 million for lying that its USDT was 100% backed by fiat currencies. At the time, the company published its reserves itself. Today, reports produced by the BDO firm are published quarterly to specify how Tether theoretically ensures its USDT, but these do not constitute the same guarantee of reliability as a real audit.
Indeed, a report may indicate the status of reserves or transactions without an independent review of the veracity of the data.
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Could USDT actually collapse?
As one user on Today, only 0.9% of Tether's reserves are in cash, with the rest made up of US Treasuries, Bitcoin or precious metals, among others.
Composition of Tether reserves, according to its latest report dated June 2024
In the worst case scenario, if Tether's name was included on the list Specially Designated Nationals and Blocked Persons (SDN) of OFAC, Cantor Fitzgerald, a major financial services company that manages a large portion of the U.S. Treasury Bills (T-Bills) that Tether uses to guarantee the value of its USDT stablecoin, would likely be legally required to block its business relations with Tether.
An unlikely eventuality, American regulators having nothing to gain from collapsing the market maintained by USDT which belongs, above all, to investors a priori protected by these same regulators. And considering the colossal capitalization of USDT, the ramifications of such sanctions would today go beyond just the crypto ecosystem..
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“ For the crypto industry as a whole, I think Tether is too big to fail, » declared Hillary Allen, professor of law at American University and specialist in digital assets, in a recent interview. “ If Tether were to lose all its value tomorrow, it would be catastrophic for the crypto economy, » he added.
According to calculations by the Wall Street Journal, over $190 billion in USDT is traded daily.
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Sources: Tether, Bloomberg
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