Rarely a week passes when Tether, the company responsible for issuing the USD-pegged cryptocurrency of the same, isn’t in the news. In the last 24 hours, two separate reports into the status of Tether and its USDT tokens have been published, one examining its legal status and the other exploring its blockchain. Meanwhile, Upbit exchange has reassured its customers that in the event of USDT being withdrawn, it will guarantee all deposits in USD.
Tether Faces a Twin Attack
Nicholas Weaver is a computer security researcher at the International Computer Science Institute in Berkeley. On Thursday, he published a piece in Lawfareblog giving his thoughts on the likelihood of Tether being targeted by U.S. regulators. It was recently revealed that Tether was subpoenaed in December amidst mounting speculation as to the company’s operations. Subpoenas of companies that have a presence on U.S. soil are not unusual, and are not evidence in themselves of an imminent shutdown by financial regulators. But with no official comment from Tether or U.S. regulators, onlookers have been left wondering.
In the opinion of Nicholas Weaver, “Because of their use in criminal activity, most cryptocurrency exchanges are cut off from the conventional banking system. Those that have access are required to generate IRS reports on transactions of a certain size and report suspicious activities. But substantially more could be done to disrupt unregulated exchanges – and the token Tether should be the government’s next target.”
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In particular, U.S. regulators should investigate those behind Tether for possible violations of Patriot Act provisions on money laundering and other financial fraud laws. Prosecution is likely to inhibit criminal scheming and to substantially disrupt the exchanges that rely on Tether to function.
Weaver goes on to write: “Tether appears likely to be a scheme that facilitates money laundering or to be a “wildcat bank,” one that prints banknotes that aren’t actually backed. In both cases the U.S. government can, and should, intervene.” The comparison he draws is with Liberty Reserve, an early experiment with self-issued currency without government approval. It didn’t end well. By the time U.S. officials swooped on the Costa Rica based company, alleging money laundering and providing unlicensed financial services, it had amassed over one million users. Many of them lost everything when the company was shuttered in 2013.
https://news.bitcoin.com/new-reports-shine-a-spotlight-on-tethers-legal-status/