Responding to UN's Claims on USDT's Use in Illicit Activities

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Amidst escalating concerns about the role of cryptocurrencies in illegal financial operations, Tether, a leading stablecoin issuer, and its custodian, Cantor Fitzgerald, have stepped up to counter recent allegations made by the United Nations. The UN’s report, released recently, cast a spotlight on Tether’s USDT, particularly its utilization on the TRON155 blockchain, as a preferred medium in various nefarious activities, including cyberfraud and money laundering.

This report, drawing on data from Bitrace, pointed out that transactions involving over 17 billion USDT from September 2022 to September 2023 were linked with illegal currency exchanges, unauthorized trade of commodities, illicit payment processes, and a range of criminal acts.

In a recent blog post, Tether expressed its disappointment with the UN’s approach, criticizing the organization for singling out USDT and ignoring its significant role in bolstering the economies of developing nations. Tether argued that the UN could greatly benefit from a deeper understanding of blockchain technology and its capabilities in curbing financial crimes. The company has offered to support the UN in gaining this understanding, drawing upon its experience in engaging with various US departments, including the Department of Justice, to foster a more informed environment.

We believe the UN could benefit from an expanded understanding of blockchain technology and the immense improvements it offers with respect to fighting financial crime. We encourage a proactive learning approach and believe it is vital for a more informed environment, and are happy to support the UN in gaining more understanding.

“They have what they say they have”

Cantor Fitzgerald, responsible for safeguarding Tether’s assets, has also voiced its support. CEO Howard Lutnick, in a statement at the Davos conference, assured the authenticity and adequacy of Tether’s reserves, addressing long-standing speculations about their existence. Tether has always maintained that each USDT is backed by an equivalent amount in US dollars. This claim has recently been corroborated by an attestation report, showing more than $3.2 billion in reserves as of the third quarter of 2023. The report, endorsed by auditing firm BDO Italian, adds credibility to Tether’s assertions, especially considering its past engagements with other audit firms like Friedman LLP.

Can’t wait for the Tether audit then……when I last checked, Howard isn’t an auditor.
— Novacula Occami (@OccamiCrypto) January 16, 2024

On the compliance front, Tether has shown a significant evolution in its stance. Initially resistant to the mandates of the US Office of Foreign Assets Control, the stablecoin issuer has changed its policies since December 2023. This includes implementing controls in the secondary market and freezing assets in wallets external to its platform. This change in approach is underscored by Tether’s action of freezing 161 wallets, some of which were connected to the OFAC-sanctioned Tornado Cash, marking a stark contrast to its previous position in August 2022 of not freezing Tornado Cash addresses.

In a broader context, Cantor Fitzgerald’s CEO Howard Lutnick also shared his views on Bitcoin and the recent enthusiasm over Bitcoin ETFs. Lutnick considers cryptocurrencies to be speculative in nature, especially for the American public, while recognizing their vital role as a payment mechanism in less developed regions lacking mainstream financial services like Paypal and Venmo. This stance presents an interesting perspective on the role of cryptocurrencies in different economic settings across the globe, highlighting their varied applications and implications.

Through this ongoing discourse, Tether and Cantor Fitzgerald are trying to show a commitment to addressing regulatory concerns and educating stakeholders about the positive aspects and potential of blockchain technology in the financial sector.

Where do we go from here?

Whether it is just a show done for financial gain, to maintain their stronghold over the crypto stablecoin sector, or whether it is truly motivated by ethics, is anyone’s guess. Crypto advocates would not be wrong in claiming that restricting access based on government’s opinion of what’s right and wrong goes against the founding principle of cryptocurrency, which was to provide freedom from government interference and abuse.