Tether vs. UN: Money Laundering or Misunderstood?
The TDR Three Key Takeaways:
- Tether’s Significant Market Expansion: In 2023, according to Block.co Tether’s market share grew to over 70% despite UN allegations of its involvement in money laundering, contrasting with the decline of its competitor, USD Coin.
- UN Accusations vs. Tether’s Countermeasures: The UN reports Tether’s role in financial scams in South-East Asia, while Tether defends its practices by highlighting its token traceability, cooperation with law enforcement, and anti-crime measures like freezing illicit funds.
- The Role of Blockchain in Dispute: Tether criticizes the UN for underestimating blockchain’s potential in combating financial crimes, highlighting a need for better understanding and regulatory balance in the digital currency landscape.
In 2023, Tether, the company behind the USDT stablecoin, witnessed a significant increase in its market share, now commanding over 70% of the global stablecoin supply. This growth in market dominance is notable, with Tether’s stablecoins surpassing 95 billion in circulation, exceeding the GDPs of countries like Guatemala and Bulgaria. This expansion contrasts with its main competitor, Circle’s USD Coin (USDC), which saw its circulation decrease from over 48 billion to 27 billion tokens in the same period.
This market growth for Tether comes amidst a recent UN report highlighting the use of Tether’s crypto token in money laundering activities in South-East Asia. The UN’s Office on Drugs and Crime attributes the increase in financial scams, including “pig butchering” scams and money laundering operations, to the use of Tether’s tokens. These scams leverage Tether’s transaction speed and anonymity, compounded by the current lack of rigorous cryptocurrency regulations. Tether’s stablecoin, pegged to the US dollar, is particularly favored in these illegal operations due to its quick and irreversible transaction capabilities.
In defending itself against these allegations, Tether challenges the UN’s report, stressing the traceability of its tokens and its collaborative efforts with law enforcement agencies like the DOJ, FBI, and USSS to fight illicit use of cryptocurrencies. Tether points to its proactive measures, such as freezing over $300 million in funds related to criminal activities and developing transaction monitoring tools with Chainalysis, as evidence of its dedication to preventing financial crimes. The company argues that the public blockchain technology underpinning its transactions renders its tokens impractical for illegal uses.
Tether also criticizes the UN for not acknowledging the potential role of blockchain technology in combating financial crime. The company extends an offer to assist the UN in understanding and effectively utilizing blockchain technology. Tether cites its history of working with international law enforcement agencies as a demonstration of its commitment to transparency and the fight against financial crimes.
This situation underscores the dual nature of the digital currency landscape, where significant market growth for companies like Tether coincides with increasing scrutiny and challenges related to financial crimes and regulatory compliance.