Rumors surrounding a U.S. investigation into Tether (USDT) — the largest stablecoin globally — have triggered a notable decline in Bitcoin and the broader cryptocurrency market.
On October 25, the Wall Street Journal reported that federal authorities are looking into Tether for potential violations of sanctions and anti-money laundering regulations. With a valuation pegged to the USD at a 1:1 ratio, USDT sees daily trading volumes of approximately $190 billion and serves as a significant financial resource for entities on the U.S. sanctions list.
Tether’s CEO, Paolo Ardoino, responded to the report by stating that these are “old rumors.” Nonetheless, the market reacted strongly to the news.
Bitcoin’s price had been on the verge of reaching the $70,000 mark before the article’s release. On the morning of October 25, Bitcoin was trading close to $69,000, with expectations of a breakout above the resistance level after a prolonged period below $70,000. However, following the publication of the WSJ article, Bitcoin’s price fell to $66,500 within minutes, resulting in a nearly 2% drop in value within 24 hours. The broader cryptocurrency market also faced declines, with the top 20 cryptocurrencies experiencing an average decrease of 2.3%.
Ethereum (ETH), the second-largest cryptocurrency by market capitalization, saw its price fall from $2,505 to $2,461. Other major cryptocurrencies, including Binance’s BNB, Solana (SOL), and XRP, also witnessed price declines before recovering slightly.
In his remarks on X, Ardoino reiterated, “As we told WSJ, there is no indication that Tether is under investigation. The article is merely repeating old information. Period.” Additionally, Tether’s official blog criticized the WSJ for allegedly overlooking the company’s collaboration with law enforcement agencies to prevent misuse of USDT and other cryptocurrencies for illicit activities. Tether emphasized that there has been no official confirmation of an investigation and called the article’s claims irresponsible.
This isn’t the first instance where Tether has faced scrutiny from U.S. authorities. In October 2021, Tether and its affiliated exchange, Bitfinex, were fined $42.5 million by the Commodity Futures Trading Commission (CFTC) for regulatory violations. Furthermore, Tether was required to settle a $61 million penalty following an investigation by the New York state authority and the CFTC regarding misleading claims about the backing of USDT.
Brad Garlinghouse, CEO of Ripple, mentioned in a May podcast that the U.S. government is targeting Tether, although he did not provide specific evidence for his claims.
Records indicate that Tether has cooperated with law enforcement since its inception in 2014, aiding over 145 agencies in recovering more than $108 million worth of USDT tied to illegal activities. Tether representatives argue that the transparent nature of blockchain technology makes USDT less appealing to criminals, as it enhances the government’s ability to monitor and recover illicit funds.
The allegations surrounding Tether have significant implications for the market, especially considering recent actions against major cryptocurrency firms. For instance, Binance’s founder, Changpeng Zhao, was sentenced to four months in prison and fined $4.3 billion, leading to substantial market fluctuations. Experts worry that ongoing accusations against leading digital currency companies like Tether could hinder Bitcoin’s price recovery and affect the overall cryptocurrency market, especially after a prolonged period of stagnation.