Tether's Growing Use In Money Laundering

The UN report warns of Tether's increasing use in money laundering and scams in South-East Asia.

Is money laundering a major use case for USDT?

The United Nations has issued a stark warning about the increasing use of Tether's USDT, a leading cryptocurrency stablecoin, in money laundering activities across South-East Asia. A recent UN report highlights Tether's role in a wide array of financial crimes, including elaborate scams like "pig butchering".

The Rise Of Tether In Illicit Financial Activities

The UN's Office on Drugs and Crime's report outlines how Tether's stablecoin has become central to sophisticated money laundering operations. These operations include pig butchering' scams, in which fraudsters create fake romantic connections to deceive victims into transferring large sums.

FinCEN Issues Pig Butchering Warning
Pig butchering scams involve the scammer gaining the victim’s trust, often over time, before tricking them into handing over money.

The report notes the shift towards high-speed, underground Tether transactions by organized crime groups, especially in online gambling platforms operating illegally.

Jeremy Douglas of the UN's Office on Drugs and Crime emphasized the creation of a parallel banking system by organized crime using Tether and other technologies, significantly enhancing the region's criminal ecosystem.

Tether's Role And Regulatory Challenges

Tether, a stablecoin pegged to the US dollar, differs from cryptocurrencies like Bitcoin, which are not tied to hard currencies and are mainly used for speculation. With approximately $95 billion in circulation, Tether facilitates traders in moving in and out of crypto trades. However, its irreversible and speedy transactions make it the preferred choice for criminal activities, as highlighted by Erin West, a cybercrime expert.

FAQ Box

FAQ

What are stablecoins?


Stablecoins are cryptocurrencies designed to minimize price volatility, typically pegged to a stable asset like the US dollar.

FAQ

Who is behind Tether?


Tether is operated by Tether Limited, part of the Bitfinex trading platform.

FAQ

When was Tether established?


Tether was launched in 2014, originally named "Realcoin."

FAQ

How does Tether ensure transparency in its reserve holdings?


By undergoing regular audits and publishing reports detailing its reserves, demonstrating that each Tether token is adequately backed by assets.

Recent enforcement actions have seen authorities dismantle several networks laundering illicit Tether funds. In August, Singaporean authorities recovered $737 million in cash and crypto, and in November, Tether froze $225 million worth of tokens linked to a criminal syndicate following a joint investigation.

Tether Under Scrutiny

Despite global enforcement crackdowns, criminal groups continue to use Tether's token for moving funds quickly and efficiently. The stablecoin operator has faced regulatory scrutiny over asset management and financial institution ties. In 2021, the Commodity Futures Trading Commission fined Tether $41 million over misleading statements regarding dollar backing for its stablecoin.

In November, Tether brought US authorities onto its platform to combat illicit token use, resulting in a 27% increase in blacklisted wallets, according to CCData. However, challenges persist, as evidenced by Tether's controversial deposit of over $1 billion with a subsidiary of Britannia Financial Group, whose founder faces charges in a separate case.

Tether’s $1 Billion Investment In Firm Linked To Bribery Allegations
Tether faces a High Court battle over a $1 billion deposit with Britannia Financial, linked to a Tory donor indicted in a bribery case.

Tether's Dual Role In The Financial Landscape

Tether's increasing involvement in money laundering and financial crimes, as highlighted by the UN report, underscores the challenges in regulating and managing cryptocurrencies. While providing a stable and efficient medium for legitimate crypto trades, Tether's attributes make it attractive for illicit use, raising concerns about its broader impact on the global financial system.


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