Tether has contested recent allegations made in a report by The Wall Street Journal (WSJ), which suggested an increase in the illicit use of its stablecoin.
The report claimed that Tether was being employed for activities such as money laundering, terror financing, and sanctions evasion.
These claims were based on information from indictments, blockchain analysis, and sanctions notices.
Tether’s appeal lies in its ability to maintain a 1:1 exchange rate with the United States (US) dollar, making it a favoured tool among traders.
However, this same convenience has also attracted illicit financial activities, according to the report.
It cited instances where Tether was implicated in financing Hamas, paying Chinese fentanyl suppliers, funding North Korea’s nuclear programme, and facilitating the purchase of sanctioned Venezuelan oil for Russian oligarchs.
In response to these allegations, Tether issued a blog post, disputing the WSJ’s claims, stating that the reports were based on “highly erroneous interpretations of data.”
In its post, Tether stated:
“There is simply no evidence that Tether has violated Sanctions laws or the Bank Secrecy Act through inadequate customer due diligence or screening practices. Decision-makers, stakeholders and the general public must correctly discern between conjecture and fact. We invite and encourage rigorous scrutiny based on factual, corroborated data rather than misinterpretation and misinformation.”
Despite these clarifications, The WSJ has not issued a correction.
In light of these developments, US lawmakers have increased their scrutiny of Tether and other cryptocurrency companies.
This has led to bipartisan calls for the application of the Bank Secrecy Act and other oversight measures to combat money laundering and illicit finance in the cryptocurrency space https://www.coinlive.com/news/Is-Crypto-Being-Exploited-for-Financing-Terrorism-Like-the-Israel-Hamas.
Senator Cynthia Lummis and Representative French Hill have urged the Justice Department to expedite its investigation into Tether, emphasising the importance of cutting off funding to terrorists targeting Israel.
The letter reads:
“We urge the Department of Justice to carefully evaluate the extent to which Binance and Tether are providing material support and resources to support terrorism through violations of applicable sanctions laws and the Bank Secrecy Act. To that end, we strongly support swift action by the Department of Justice against Binance and Tether to choke off sources of funding to the terrorists currently targeting Israel.”
Tether’s centralised nature, which allows the company to freeze the token, has also come under scrutiny in contrast to the decentralised nature of other cryptocurrencies like Bitcoin.
In its response, Tether expressed its openness to constructive dialogue about integrity and security.
It emphasised the importance of education regarding virtual assets, regulatory compliance, and due diligence.
Tether also asserted its commitment to safeguarding the transparency of blockchain technology and refuted claims of violating sanctions laws or the Bank Secrecy Act.
Tether revealed that it has been collaborating proactively with 31 law enforcement agencies across 19 jurisdictions to combat malicious activities.
They reported freezing $835 million in assets linked to unlawful activities, primarily involving hacks of crypto exchanges and DeFi platforms.
In addressing concerns related to the Middle East, Tether cooperated with the NBCTF in Israel to freeze 32 addresses associated with illegal activities, safeguarding $873 million.
While the amounts involved are comparatively small in comparison to traditional financial systems, Tether remains committed to maintaining a vigilant stance against illicit conduct and continues to work with law enforcement agencies in cases related to Ukraine and Israel.
Tether urged the US government to fact-check media misinterpretations of data.