The Trouble with Tether

The recent plea agreement between U.S. federal agencies, Binance, and its founder Changpeng ‘CZ’ Zhao is expected to have significant consequences for the Tether (USDT) stablecoin and the digital asset sector as a whole.

Criminal Practices
It Was Aware
Binance acknowledged a large volume of suspicious transactions passing through its accounts. These suspicious transactions included those related to ransomware, terrorist financing, high-risk jurisdictions, darknet markets and scams, and child sexual abuse material (CSAM). The failure to report well over a hundred thousand suspicious transactions, including “over a thousand” direct BTC and ETH transactions “worth hundreds of thousands of dollars” linked to “child exploitation-associated CVC wallet addresses, reflects the exchange’s disregard for regulatory obligations.

Penalties and Monitoring
FinCEN has imposed a $4.3 billion settlement against Binance, including the establishment of an independent third-party monitor and a suspicious activity report (SAR) Lookback Consultant, making it clear that Binance won’t be able to dodge its compliance responsibilities. The monitor will have unprecedented access to Binance’s transaction records for 2018 through 2022. In addition, the monitor must deliver a detailed report on its findings no later than May 2025.

Cumberland & USDT
Tether has been under scrutiny for issues such as money laundering, human slavery, and bank fraud. USDT is the preferred digital asset of terror groups, and Tether has been linked to criminal activities worldwide. Notably, Tether has demonstrated a growing awareness of its legal peril and is cooperating with U.S. authorities to disrupt illicit USDT-based activity.

Consequently, Tether finds itself in a difficult situation, torn between complying with U.S. law and offending criminal organizations that rely on USDT to sustain their operations. The company’s original CEO, Jean-Louis van der Velde, recently handed the reins to Paolo Ardoino in response to these challenges.

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Overall, Tether’s compliance efforts and changes in business operations are crucial in determining the future of the stablecoin and its status in the digital asset environment.

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By Team