Crypto’s Tether Faces New U.S. Probes

Of all the legal actions taken against cryptocurrency companies by US regulators and prosecutors over the past year, arguably none threatens to shake up the digital-asset industry as much as a potential crackdown on Tether Holdings Ltd., Michael P. Regan and Olga Kharif reported for Bloomberg News.

Federal prosecutors in Manhattan are investigating whether the token has been used to fund illegal activities such as drug trade, terrorism, and hacking, or to launder proceeds from these activities. I Image: Tether

Tether issues a token known as USDT, designed to be a digital substitute for the US dollar, with a market capitalization of about $120 billion.

It ranks as the third-biggest cryptocurrency by value and is the most traded token on a daily basis due to its role as a stand-in for the dollar in markets where traders aren’t able to use traditional currencies.

“For the crypto industry and crypto writ large, I do think Tether is too big to fail,” Hilary Allen, a law professor at American University who studies digital assets, said in an interview.

This was a day before The Wall Street Journal reported on new US probes into the token that raised the possibility of sanctions from the US Treasury. “If Tether were to go to zero tomorrow,” Allen added, “it would be disastrous for the crypto economy.”

The Wall Street Journal also reported on Friday that the US has not ceased its scrutiny of Tether.

Federal prosecutors in Manhattan are investigating whether the token has been used to fund illegal activities such as drug trade, terrorism, and hacking, or to launder proceeds from these activities.

An earlier Bloomberg report published in March indicated that the US and UK were reviewing over $20 billion in transactions made on Moscow-based Garantex, a crypto exchange sanctioned by both countries due to suspicions of enabling financial crimes and illicit transactions in Russia.

The Treasury Department is reportedly considering sanctions on Tether because of its widespread use by individuals and groups sanctioned by the US, such as Hamas and Russian arms dealers.