Federal Probe Into Tether Examines Potential Sanctions And Money-Laundering Breaches: WSJ

U.S. federal authorities are currently examining stablecoin issuer Tether USDT/USD for potential infractions of U.S. sanctions and anti-money-laundering regulations, according to a report.

What Happened: This inquiry, conducted by the Manhattan U.S. Attorney's Office, is investigating possible misuse of Tether's stablecoin in activities like drug trafficking, terrorism financing, and laundering proceeds from these illicit actions, The Wall Street Journal reported.

While Tether CEO Paolo Ardoino has not responded to queries from Benzinga, he termed the WSJ report as regurgitation of old noise.

“As we told to WSJ there is no indication that Tether is under investigation. WSJ is regurgitating old noise. Full stop,” he stated on Twitter.

In a statement sent to Benzinga, Will Hild, Executive Director of Consumers’ Research said that the development emphasizes what Consumers’ Research has been saying for months.

“We have worked hard to educate consumers on Tether’s shady practices and record of transparency refusal, and we are proud to see our warnings be heard. For years Tether has bent over backwards to keep any daylight from being shined on its books or business. Today’s news makes it all the more concerning that Tether has, to date, never undergone an audit with a credible accounting firm,” Hild said.

According to the report, the Treasury Department is also reportedly considering imposing sanctions on Tether.

This scrutiny has emerged in response to the stablecoin's usage by sanctioned groups, including specific entities in Russia and the Middle East.

Sanctions on Tether would restrict American companies from engaging in transactions with the organization.

Tether's stability, tied to its dollar peg, has amplified its role in global financial transactions, especially in regions where access to U.S. currency is restricted.

With daily trading volumes nearing $190 billion, Tether has become a crucial tool for transactions in high-risk areas related to national security concerns, such as organized crime and arms trading.

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This role has positioned Tether as a significant player in the Treasury market, with the company now holding $81 billion in Treasury bills—a move some see as bridging crypto with traditional finance.

Tether's leadership has even asserted that these holdings support broader financial stability, though skeptics, including experts from the Peterson Institute, caution that Tether's presence is small compared to traditional finance giants.

Former Speaker of the House Paul Ryan suggested that stablecoins like Tether could help address future U.S. debt challenges, but the broader impact of such holdings remains modest when contrasted with the multitrillion-dollar money market funds and major asset holders like Berkshire Hathaway.

The Justice Department's investigation into Tether isn't new; past inquiries have explored whether certain backers engaged in bank fraud to access international financial systems.

In response to recent allegations, Tether has strongly denied any association with illicit activities, stating it has always cooperated with U.S. and international law enforcement agencies to curb criminal use of its cryptocurrency.

What’s Next: The evolving role of stablecoins like Tether in both digital assets and traditional financial markets will be a key discussion point at the Benzinga Future of Digital Assets event on Nov. 19.

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