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Tether to Allow FBI Access: Is Crypto Cooperation Sign of Maturity?

Last Updated December 19, 2023 1:08 PM
James Morales
Last Updated December 19, 2023 1:08 PM

  Key Takeaways

  • Tether has responded to allegations that it hasn’t done enough to prevent the illicit use of USDT.
  • The stablecoin issuer has written to Senators outlining a new proactive wallet-freezing policy and closer collaboration with US law enforcement agencies.
  • Tether says it recently onboarded the Secret Service and is in the process of granting similar access to the FBI.

Despite taking a larger share of the global stablecoin market than any other firm, Tether has occasionally fallen short of the squeaky-clean reputation cultivated by some of its rivals.

After coming under fire from US lawmakers for failing to prevent the illicit use of USDT by sanctioned groups and individuals, Tether has highlighted its collaboration with the Department of Justice (DoJ), the Secret Service and the Federal Bureau of Investigation (FBI).

Alleged Sanctions Violations Threaten Tether’s Reputation 

Unlike the US-based Circle and Paxos, Tether’s home in the British Virgin Islands has traditionally provided it a degree of shelter from American regulators, who have typically seen the firm as something of a rogue compared to its by-the-book peers. 

From a $42 million fine issued by the Commodity Futures Trading Commission (CFTC) in 2021 to S&P Global’s poor assessment of USDT compared to rival stablecoins, Tether has always taken criticism in its stride.  

But recent allegations that USDT was used to fund terrorism appear to have kicked Tether into damage control mode. 

In the wake of Hamas’ October 7 attacks against Israel, American politicians called for action to prevent the use of cryptocurrency in terror funding. 

It was hardly a surprise to see the likes of Senator Warren jump at an opportunity to paint crypto in a negative light. However, with the crypto-friendly Senator Cynthia Lummis calling for Tether to be investigated over its links to Hamas, the firm faced a new kind of publicity threat. In a letter to the DoJ, Senator Lummis accused Tether of  “knowingly facilitating violations of applicable sanctions laws.”

Tether Ramps up Proactive Sanctions Enforcement

On December 15, Tether CEO Paulo Ardoino penned a response  to Lummis’ letter. In it, he outlined the firm’s efforts to combat the illicit use of USDT.

After the Wyoming Senator called Tether out for only suspending wallets controlled by Hamas after it was asked to by Israeli law enforcement, Ardoino pointed to a new “proactive” wallet-freezing policy the firm implemented this month. 

He also touted an increasingly collaborative relationship with US law enforcement agencies. Ardoino said that “Tether recently onboarded the United States Secret Service into our platform and is in the process of doing the same with the Federal Bureau of Investigation (FBI).”

Doubts Raised Over Circle’s Unimpeachability

As Tether is shaking off the stigma of sanctions violations, Circle has come under pressure for similar alleged failings.

Writing to Senators Sherrod Brown and Elizabeth Warren, the Campaign for Accountability (CfA) cited  research purportedly showing that: “Multiple large flow addresses that have redeemed USDC for USD (presumably through Circle’s bank accounts) have also received funds from wallets Israeli intelligence flagged as belonging to Hamas or Hezbollah.”

Denying allegations it acted unlawfully, Circle wrote to the senators to refute the CfA’s claims, touting its “deep history of cooperating with law enforcement.”

In the latest twist in the saga, the CfA pointed out that Circle didn’t deny that USDC was among the currencies Israeli intelligence had identified as being used to fund sanctioned groups. The company, “instead argued that, because USDC constituted a small percentage amount seized, CfA’s concerns are unfounded.”

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