Author: Wenser, Odaily Planet Daily
No one expected that the "FUD USDT" program, which has been preserved in the crypto circle, would reappear at a time when the market capitalization of Tether was constantly hitting new highs.
On October 26, just as Fox Business reporter Eleanor Terrett published a report revealing that "Tether CEO Paolo Ardoino said the company currently has listing plans"; the Wall Street Journal then reported that "the U.S. Treasury Department is considering sanctioning Tether". Although Paolo later posted that "there is no indication that Tether is under investigation. The WSJ is just repeating old news", with the growing impact of regulatory forces on the cryptocurrency industry, it still gives a sense of impending doom.
Odaily Planet Daily will briefly review the follow-up to the investigation of USDT and its issuer Tether in this article for readers' reference.
The Surging Tether: A "Cash Behemoth" that has Raised Billions of Dollars in a Year
In the previous article "The "First Stablecoin" USDT Hits a New High, Unveiling the Trillion-Dollar Business Empire Behind Tether", we have conducted an in-depth analysis and multi-perspective interpretation of Tether and its USDT stablecoin business. It mentioned:
In July, Tether released its Q2 2024 financial report, showing that its profits in the first half of 2024 reached a historic high of $5.2 billion, with a net operating profit of $1.3 billion, the best performance ever.
According to a previous report by the Wall Street Journal, the funds flowing through the Tether network in 2023 were almost as much as those through the global payment giant Visa, with an annual net profit of $6.2 billion, even exceeding the net profit of $5.5 billion for ordinary shareholders of the asset management giant BlackRock last year.
CEO Paolo once stated: Due to the rise in interest rates, Tether has earned extremely high profits in the past two years, currently earning a 5.5% profit from its reserve funds, and has accumulated a total profit of about $11.9 billion in the past 24 months.
Benefiting from the "cyclical bull market" in the first half of the year, Tether and USDT's business performance has been extremely impressive, dominating the stablecoin track, and its ability to attract funds has been repeatedly verified in a series of business financial reports.
According to the details of its reserve assets, combined with the information disclosed by Tether at the Plan ₿ forum held in Lugano, Switzerland recently, its current reserves include $5.58 billion in BTC and $3.87 billion in gold (calculated at the price on October 27), totaling $9.45 billion; in addition, it also has about $100 billion in U.S. Treasuries.
Undoubtedly, supporting Tether's "trillion-dollar business empire" is not only the demand for cryptocurrency trading and exchange, but also the push from cross-border trade and even gray and black industry money laundering transactions, and this may be the main reason for the "regulatory investigation" mentioned in the media reports.
Will USDT be Hit by the "Iron Fist"? No Conclusion Yet
Previously, the Wall Street Journal reported that "according to people familiar with the matter, the federal government is investigating the cryptocurrency company Tether for possible violations of sanctions and anti-money laundering regulations. Prosecutors from the U.S. Attorney's Office for the Southern District of Manhattan have launched a criminal probe, investigating whether Tether's cryptocurrencies were used by third parties to facilitate drug trafficking, terrorism and hacking, or to launder proceeds from such illegal activities."
After the report was released, Tether's response was extremely swift.
CEO Paolo immediately clarified and explained, and later posted again stating: "In Tether's day-to-day operations, we regularly engage directly with law enforcement officials to help prevent rogue states, terrorists and criminals from abusing USDT. If we were under investigation as incorrectly claimed in the Wall Street Journal article, we would know about it. Based on this, we can confirm that the allegations in the article are absolutely false."
Tether also subsequently issued an article titled "Tether Slams WSJ's Irresponsible Reporting, Stands by Strong Law Enforcement Track Record", which stated: "Without any authoritative body confirming these rumors, and without revealing the source of the information, the Wall Street Journal's definitive writing of an article with reckless allegations is extremely irresponsible. After Tether confirmed that it has not been subject to such an investigation, it can be assured that these reports were written entirely based on speculation. This article also carelessly obscures Tether's well-documented extensive cooperation with law enforcement agencies, which is aimed at cracking down on bad actors attempting to abuse Tether and other cryptocurrencies."
However, after Tether's response, the Wall Street Journal, which was the first to disclose the information, has remained silent, either retreating or waiting for more confirmation and dissemination of the news.
It is worth mentioning that this is not the first time Tether, the "first crypto stablecoin issuer", has collided with regulatory forces:
Tether has previously undergone multiple investigations, including an investigation by the New York Attorney General's Office - which fined Tether and its parent company Bitfinex $18.5 million in 2021 for illegally operating in the state; the U.S. Commodity Futures Trading Commission also ordered Tether to pay a $41 million fine in 2021 for illegal trading.
According to reports, the latest investigation is an expansion by the Department of Justice into whether the backers of Tether have committed bank fraud. The spokesperson for the U.S. Attorney's Office for the Southern District of New York has not yet provided an immediate response.
According to a Fortune report, the potential charges may be similar to the U.S. Department of Justice and Treasury Department's allegations against Binance, which mainly involve the exchange's alleged money laundering and sanctions violations related to terrorist organizations and drug trafficking networks. Tether has been associated with groups like Hamas, and Russian arms dealers have also been involved.
Tether's Hidden Worries: Facing the Dilemma Between Regulation and Illegal Transactions
According to the "Illicit Crypto Economy Report" released by TRM Labs earlier this year, on the one hand, in 2023, 45% of the illicit transaction volume occurred on the TRON network, which is mainly for stablecoin trading (slightly higher than 41% in 2022), and the number of TRON independent addresses receiving USDT related to terrorist financing activities grew by 125% last year; on the other hand, more than half of the market value of the USDT issued by Tether is currently custodied on the TRON network (over $60 billion).
Furthermore, TRM Labs stated that the drug sales on the Dark Web market increased from $1.3 billion in 2022 to $1.6 billion in 2023, and the drug sales using the TRON network quadrupled. At the same time, cybercriminals prefer blockchain transactions because of their relatively low gas fees, minimal price volatility, and the belief that on-chain transactions are harder to trace (although this view is already outdated).
In other words, Tether has inadvertently provided the corresponding "payment means" for illegal transactions and the "breeding ground" for illegal activities. In view of this, Tether has also made its own efforts to face regulation.
In September this year, Tether and TRON announced a new partnership with TRM Labs, called the T³ Financial Crimes Unit (T³ FCU). TRM Labs, as a leading blockchain intelligence company, has professional capabilities in combating financial crimes; TRON, as a major global blockchain and DAO (decentralized autonomous organization), has strong technical capabilities; and Tether, as a giant in the digital asset industry, provides external investigative team support.
According to the cooperation arrangement, TRM will continue to provide support to TRON and Tether to identify transactions related to suspected illegal activities such as terrorism, sanctions evasion, theft, hacking, cybercrime, and fraud. TRM will leverage its proprietary technology and global investigative expert network to generate relevant intelligence, assist TRON and Tether in combating criminal activities, and provide support for law enforcement actions around the world. This cooperation has also received widespread acclaim in the industry, with coverage from well-known domestic and foreign media such as Forbes, CoinDesk, Cointelegraph, Benzinga, TheBlock, and Odaily. In addition, Tether has announced initiatives to combat criminal use and freeze addresses related to illegal activities. At the end of September, Tether announced that it had assisted the U.S. Department of Justice in recovering more than $6 million in assets related to a Southeast Asian cryptocurrency fraud scheme. The fraud group had deceived users by mimicking legitimate platforms, and Tether froze the related assets and helped the U.S. Attorney's Office in Washington, D.C. quickly recover the funds, with the office publicly acknowledging Tether's assistance in asset transfers. As of that time, Tether had assisted more than 180 law enforcement agencies in 45 jurisdictions, freezing over $1.8 billion and redistributing over $128 million to their rightful owners and law enforcement, and voluntarily freezing more than 1,850 wallets associated with illegal activities to assist global law enforcement. Previously, according to on-chain detective ZachXBT's monitoring, four stablecoin issuers, including Tether, have blacklisted two addresses, including the notorious hacking group Lazarus Group, freezing a total of $6.98 million. Additionally, ZachXBT later stated that compared to other major stablecoin issuers, Circle took an additional four and a half months to blacklist the Lazarus Group address, criticizing Circle and its CEO Jeremy Allaire for "not caring about the ecosystem, only extracting value from it." The latest on-chain USDT freezing can be traced back to around 6:01 am Beijing time today, when an address on the TRON chain containing 16,152,303 USDT was frozen. It must be said that Tether's awareness and response to the existing concerns are extremely clear and direct, but how to further prevent the use of USDT stablecoin in money laundering, drug transactions, and other illegal activities may be a direction that requires long-term effort.
