protest campaign launched in the US

An ad in New York’s Times Square accused Tether of aiding corruption and illegal activities.

Fox News reporter Eleanor Terrett tweeted a photo of a massive billboard in the middle of Times Square. She stated that this action was part of a promotional campaign run by the non-profit organization Consumers Research.

The organization’s general manager, Will Hild, compared Tether to the bankrupt FTX exchange. According to him, this is a huge “Ponzi scheme” that could lead to significant losses for investors in the future.

Hield claims that Tether’s cryptocurrency USDT is the stablecoin most frequently used in illegal activities in 2023. He also criticized the company for its lack of public scrutiny.

Does Tether help terrorists and human traffickers?

In its latest statement, Consumer Research accused Tether of facilitating illegal activities and circumventing international sanctions.

The organization launched a public campaign against Tether, claiming that the company may be linked to terrorist organizations and human traffickers using USDT stablecoins.

In addition to accusations of using USDT to finance terrorism and circumvent international sanctions, Consumer’s Research alleges that Tether has refused to conduct due diligence to prove it has sufficient reserves for stablecoins.

“We are shining a light on Tether for their decade-long refusal to regulate and their questionable business practices, including the routine use of the product by terrorists and drug and human traffickers.”

Will Hild, Executive Director of Consumer Research UN money laundering report

In January, the United Nations Office on Drugs and Crime published a report showing that criminals in Southeast Asia are increasingly using USDT to launder illicit money.

An agency spokesperson told the Financial Times that criminals have effectively created a banking system using new technologies, and that the proliferation of fully or poorly regulated online casinos and crypto assets is strengthening the region’s criminal ecosystem.

The UN has expressed concern about the pace of development of global regulation of the crypto-asset sector. Representatives of the organization believe that they need to keep up with the pace of development and expansion of the segment.

Tether representatives later published an official response to the UN Office on Drugs and Crime’s report. The organization said it was disappointed by the agency’s approach and the selectivity of its analyses.

“We are disappointed in the UN’s assessment of USDT, which highlights its involvement in illegal activities and ignores its role in helping developing economies in emerging markets.”

Tether representatives

The company emphasized cooperation with law enforcement, including the FBI and the U.S. Secret Service. Tether also stated that the nature of blockchain makes USDT an impractical choice for conducting illicit activities. This is emphasized by the large number of account blockings carried out by the company.

As a result, Tether stated that the company continues to advocate for financial transparency and invited the UN to an active dialogue.

The questionable experience of Tether founders and Wall Street control

In February 2023, The Wall Street Journal (WSJ), citing financial documents, reported that four people with little financial experience were running Tether.

According to journalists, in 2018, the majority of the shares were controlled by former plastic surgeon Giancarlo Devasini.

Another 30% of the company’s shares were split equally between former electronics importer Jean-Louis van der Velde and gambler Stuart Hoegner. Due to the Bitfinex crypto exchange being hacked, 13% went to the largest customer, Christopher Harborne. It is unknown who owns 14 percent of the company.

That same month, the WSJ published another report. He said that US Wall Street firm Cantor Fitzgerald has $39 billion worth of Tether bonds under its management. The stablecoin issuer is said to have entrusted asset management to Cantor Fitzgerald in 2021.

The report’s authors noted that the centralization of so many Tether reserves in the hands of a single firm shows Wall Street’s willingness to ignore cryptocurrency companies’ questionable track records in managing billions of dollars in assets.

Doubtful solvency

In May, the Deutsche Bank Expert Group published the results of a study on the stablecoin market. They identified the weaknesses of this asset class and pointed out Tether’s lack of transparency.

After examining more than 330 different assets, experts concluded that 49% of stablecoins cease to exist within 8-10 years. Many are experiencing “turbulence” caused by speculative sentiment in the crypto market. As a result, they risk losing their ties to the dollar, euro or other currencies.

Analysts also talked about the collapse of algorithmic stablecoin TerraUSD (TUSD) in 2022. It is known that investors lost more than $40 billion as a result of the fraud scheme of Terraform Labs and its co-founder Do Kwon.

They said Tether’s solvency status was questionable. Given the monopoly on the stablecoin market, if USDT crashes the consequences will be more serious.

However, Tether criticized Deutsche Bank’s report. Representatives of the USDT issuer stated that this lacked clarity and solid evidence. Additionally, according to Tether, the study is based on vague statements rather than meticulous analysis.

Company representatives said Deutsche Bank analysts predicted several problems in the stablecoin industry, but did not provide specific data to support their claims.

The issuer’s representative added that Deutsche Bank’s history of violations and penalties raises questions about the bank’s ability to criticize others in the industry.

Tether reports continue to glow

Despite many accusations, including a lack of reserve transparency, the firm’s latest report states that 90% of the USDT stablecoin is backed by cash and cash equivalents. The asset’s supply volume increased by $12.5 billion in the first quarter of 2024.

Source: Tether

Additionally, the firm reported record profits of $4.52 billion in the first quarter of 2024. About $1 billion came from income from U.S. Treasury securities. The report emphasized that Tether increased excess reserves by 1 billion dollars in the first quarter. The total amount of this fund exceeded the company’s liabilities by $6.3 billion.

Who to believe?

Throughout its existence, Tether has periodically faced accusations of opaque reserves, aiding money laundering and terrorist financing.

However, despite the many accusations, USDT remains a leader among stablecoins with a market dominance of over 69% with a total market capitalization of $162 billion.

Source: DefiLlama

Additionally, the company’s profits continue to break records. Therefore, despite various accusations that its activities are not transparent, Tether continues to occupy a dominant position and survive.

Disclosure: This article does not constitute investment advice. The content and materials on this page are for educational purposes only.