ether Holdings Ltd., the issuer of the broadly used stablecoin USDT, is in the headlines again due to reports of federal investigations. The company might very well come under the scrutiny of U.S. regulators, questioning its operations and financial practices. All these claims have been firmly denied by Tether's chief executive Paolo Ardoino.
Investigations and Reports by the Regulator
According to a report from Bloomberg Law, a potential crackdown by U.S. regulators on Tether could have sweeping implications for the cryptocurrency market. The company, with a market capitalization of about $120 billion, is under probe for all infringements related to sanctions and AML legislation.
The report cited people familiar with the matter, the Manhattan U.S. Attorney's Office is reportedly investigating whether USDT has been used to facilitate nefarious activities such as narcotics trafficking and terrorism.
The Wall Street Journal has reported that Tether is facing the specter of potential sanctions from the US Department of Treasury because of its ties with some entities under the US sanctions. This makes investors and traders using USDT as a source of liquidity in the crypto market concerned.
Tether's Response to Allegations
In response to these reports, Ardoino went on social media and referred to them as "old noise." There has been no indication of any investigation into Tether, he added, noting that the reports come from speculation, not reporting on facts.
He further chided the stories for their lack of credible sources. Tether has cooperated with law enforcement in trying to curtail the misuse of the stablecoin many times, Ardoino asserted.
An official statement by Tether seconded Ardoino's remarks, emphasizing the company's commitment to compliance and its proactive steps toward mitigating the risks of its cryptocurrency. It has been in the line of fire before, reaching a settlement with regulators for $60 million in 2021 without admitting wrongdoing on claims about its reserves.
Impact on the Cryptocurrency Market
Indeed, uncertainty around Tether is already weighing on the broader cryptocurrency market. The major cryptocurrencies, Bitcoin and Ethereum, shed 2.7% and 3.5%, respectively, in the wake of news of the contemplated regulatory action; even the price of Tether flexed, briefly falling below the $1 peg it is supposed to be pegged to before recovering.
Being the largest stablecoin by market capitalization, Tether is crucial in the cryptocurrency ecosystem and serves as a trading pair in many exchanges. Among businesses and investors alike, one of the biggest questions is its status in terms of regulation because there's a fear that if more scrutiny is involved, it will make things more difficult to work with the stablecoin in the market.
