Tether’s USDT and Lack of Oversight

The report highlighted that while Tether conducts thorough vetting of its direct clients, it does not regulate the extensive secondary market where most USDT transactions occur. This lack of oversight has raised red flags among regulators, especially since Tether’s network processed almost as many money transactions as Visa cards throughout 2023. Furthermore, the company operates with less than 100 employees, a stark contrast to BlackRock’s workforce, showcasing Tether’s immense scale achieved with minimal staff.

A United Nations report from January 2023 indicated that Tether’s USDT has become a preferred tool for money laundering in Southeast Asia. Its widespread usage in unregulated secondary markets positions the stablecoin as a prime candidate for facilitating illegal activities, including money laundering and evading sanctions.

Inability to Fully Mitigate Related Risks

The Wall Street Journal emphasized the broader implications of Tether’s operations. As the U.S. government intensifies its scrutiny of organizations involved in arms trafficking, sanction evasion, and financial fraud, Tether’s role in facilitating large-scale, unregulated transactions has emerged as a significant concern.

The increasing footprint of stablecoins in a largely unregulated financial ecosystem seems likely to hinder the U.S.’s efforts to effectively enforce global financial sanctions.