Ethereum

United

Tornado

Despite Tether's operations being outside the U.S., American regulators, through the <a href="https://financefeeds.com/tether-freezes-ofac-listed-wallets-under-new-policy/" rel="noopener noreferrer nofollow">Office of Foreign Assets Control (OFAC),</a> has mechanisms to influence the stablecoin's offshore activities.
One notable instance of regulatory intervention mentioned by JPMorgan involves Tether's connection with Tornado Cash, a cryptocurrency mixer on the Ethereum network, which was sanctioned by OFAC in August 2022 for money laundering activities. This action confirmed the ability of regulatory bodies to impact the usage of tether indirectly, through international cooperation and measures targeting associated entities.
JPMorgan analysts suggest that impending stablecoin regulations could pose challenges for Tether. They argue that such regulations are likely to favor stablecoins offering greater transparency and adherence to emerging KYC and AML standards, thereby reducing Tether's appeal. This regulatory shift could also affect the <a href="https://financefeeds.com/tether-mints-another-billion-usdt-amidst-market-skepticism/" rel="noopener noreferrer nofollow">decentralized finance (DeFi) sector</a>, where USDT plays a critical role as a form of collateral and liquidity.
Furthermore, the report highlights that global coordination on stablecoin regulations, led by the Financial Stability Board (FSB) across G20 nations, will further limit the operation of unregulated stablecoins like Tether.
Amid these challenges, Tether has been urged to increase the transparency of its reserve investments. While efforts have been made towards disclosing real-time reserve data, JPMorgan remains skeptical if these disclosures are enough to ease concerns over Tether's operations.
The critique from JPMorgan follows previous comments criticizing USDT's market dominance as harmful to the broader crypto ecosystem. In response, Tether's CEO Paolo Ardoino defended the stablecoin's position, labeling JPMorgan's concerns as "hypocritical," especially coming from one of the world's largest banks.
Earlier in January, Tether countered a United Nations (UN) report that highlighted the alleged use of its USDT stablecoin in illicit activities in East and Southeast Asia. The report identified USDT, particularly on the Tron blockchain, as a primary vehicle for money laundering in the region.
The issuer also shed light on its proactive measures in combating illicit use of its token, mentioning that it had&nbsp;<a href="https://financefeeds.com/tether-freezes-ofac-listed-wallets-under-new-policy/" rel="noopener noreferrer nofollow">frozen over $300 million</a>&nbsp;in USDT linked to illegal activities in recent months. This included $225 million frozen in November 2023 as part of a U.S. investigation into a Southeast Asian human trafficking syndicate. The company asserted that&nbsp;<a href="https://financefeeds.com/tether-freezes-wallets-involved-in-suspicious-usdt-transfers/" rel="noopener noreferrer nofollow">tracking Tether tokens</a>&nbsp;through collaboration with law enforcement ensures superior monitoring capabilities compared to traditional banking systems, which have historically been used for money laundering activities.

JPMorgan highlights OFAC control over Tether's USDT

FinanceFeeds

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