Tether executives could be facing criminal charges as the U.S Department of Justice (DoJ) is investigating the company for possible offences it may have committed years ago, according to Bloomberg which cited three people with direct knowledge of the matter.
What you should know
The DoJ is looking into Tether, the company that created the most widely used stablecoin in the cryptocurrency market, to determine whether or not its executives committed bank fraud.
The DoJ investigation is focused on past events that occurred years ago when Tether was still fighting for market share. More specifically, they are investigating whether or not Tether concealed from banks that their transactions with them were linked to cryptocurrency.
According to Bloomberg, three people with direct knowledge of the matter confirmed this news and asked not to be named because the probe is confidential.
The USDT plays an important role in the cryptocurrency ecosystem because it is widely used to trade Bitcoin. This is because the USDT is by far the most popular stablecoin that is designed to prevent loss of value due to wild price swings. The USDT pairs 1:1 against the U.S Dollar and this makes it ideal for buying and selling more volatile coins.
The USDT has approximately $62 billion coins in circulation. It is ranked 3rd by market capitalization surpassed only by Bitcoin and Ethereum. This year alone, Tether has grown by 195% since the beginning of the year and the coin is known for being responsible for more than half of all Bitcoin trades.
Tether has always been in the news and it has been subject to media scrutiny. The coin has been accused of not having enough funds to back the current USDT in circulation. The company said in a statement that it routinely has an open dialogue with law enforcement agencies, including the DoJ, as part of its commitment to cooperation and transparency.
One of the sources confirmed that the DoJ sent letters to individuals alerting them that they are targets of the investigation. The letters sent means that a decision on whether to bring a case would be made soon.
The Justice Department has declined to comment but criminal charges against Tether would mark one of the most significant developments in the U.S. government’s crackdown on virtual currencies and this would have broad implications for the cryptocurrency market.
Tether was first issued in 2014 as a solution to a problem plaguing the cryptocurrency market, which is banks not wanting to open accounts for virtual-currency exchanges because they feared touching funds could mean touching money tied to drug trafficking, cyberattacks and terrorism. The reason for Tether’s existence is to help traders get into volatile cryptocurrency assets at better prices which they determine.
Tether is backed 1:1 to the U.S dollar which means the exposure to the wild price fluctuation in other coins is completely eradicated and funds can be transferred instantaneously from exchange to exchange.
Asides from centralized exchanges, stablecoins have been attracting a lot of intense scrutiny from regulators. The U.S. Treasury Department and Federal Reserve are among agencies concerned that the tokens could threaten financial stability and are obscuring transactions tied to money laundering and other misconduct because they allow criminals to make payments without going through the regulated banking system.
Treasury Secretary Janet Yellen said last week that watchdogs must “act quickly” in considering new rules for stablecoins.