Tether, which is headquartered in the British Virgin Islands and Hong Kong, has turned out to be the most prominent stablecoin. The token has a market capitalization of $62 billion, accounting for over 50% of all Bitcoin transactions. As a result, felony proceedings against the token would be a significant step forward in the US government’s attack on cryptocurrencies.
Tether responded by dismissing the claims as “stale” and “click-bait” contrived. “Tether regularly has an interactive session with law enforcement authorities, like the US Department of Justice, as part of its dedication to collaboration, openness, and accountability,” the company said on its website.
Tether has been under investigation by federal investigators since 2018. Officials wanted to know if traders exploited the token to artificially inflate Bitcoin during its 2017 meteoric rise. In recent times, officials issued letters to those connected to Tether informing them that they were being scrutinized for fraud.
The notification also hinted that a verdict on whether or not to sue would be made shortly. In addition, top officials would evaluate if the allegations were justified. The US Treasury Department, for example, has expressed worry about the illegal activity linked with stablecoins. The coin was created to enable payments outside of the supervised financial industry.
As a result, money laundering and other criminal activity may be possible. Treasury Secretary Janet Yellen recently suggested US regulators to “act quickly” when it comes to cryptocurrencies, especially stablecoins.
Stablecoins have been linked to financial volatility, according to credit rating agencies like as Fitch Ratings. Tether is tied to one US dollar, as per its developers, using hard cash and other assets. Commercial paper, precious metals, and corporate bonds are among the latter.
These factors have generated worries that underlying assets will be in short supply in the case of increased stablecoin selloff. Short-term credit markets might be destabilized as a result of this. Another thorn in Tether’s side came when New York Attorney General Letitia James claimed that Tether subsidiaries hid losses.
James also stated that the companies misled about Tether’s link to the US dollar since they didn’t have banking services in 2017. Bitfinex was one of the associates that resolved claims for $18.5 million without acknowledging or disputing the accusations. Tether was created in 2014 to address the issue of cryptocurrency volatility.
The token also solves the problem of banks declining to create accounts for cryptocurrency exchanges because they are concerned about illegal activity. Tether, on the other hand, continues to rely on banks to store funds and execute client activities. Tether and its partnership with Wells Fargo & Co. is an illustration of a bad alliance.
In 2017, the latter filed a lawsuit against Wells for obstructing client transactions. Despite this, the lawsuit was abandoned just as quickly.