Federal investigators have launched a probe into the stablecoin company Tether, examining potential violations of sanctions and anti-money laundering regulations, as reported by The Wall Street Journal (WSJ). Tether, known for its stablecoin USDT, holds a significant position in global cryptocurrency markets due to the stablecoin’s pegged value to the U.S. dollar.

According to the WSJ, the U.S. Attorney’s Office in Manhattan is leading the investigation, with a focus on whether Tether has facilitated illegal activities. The inquiry is scrutinizing whether the stablecoin has been used by sanctioned groups and entities, including those linked to terrorism, drug trafficking, and arms dealing. The Treasury Department is also reportedly considering imposing sanctions on Tether due to its use by some sanctioned entities, such as Hamas and certain Russian arms suppliers.

In response to the investigation, Tether stated, “To suggest that Tether is somehow involved in aiding criminal actors or sidestepping sanctions is outrageous.” The company emphasized its compliance efforts, citing partnerships with analytics firms like Chainalysis and TRM Labs to improve transaction monitoring. Tether’s Chief Technology Officer, Paolo Ardoino, dismissed the WSJ’s report on X, calling it “regurgitating old noise.”

Tether’s role in the cryptocurrency ecosystem is substantial, with daily trading volumes reaching up to $190 billion. However, this isn’t the company’s first regulatory challenge. Previously, Tether paid $61 million to resolve separate allegations from New York and the Commodity Futures Trading Commission (CFTC), which had claimed Tether misrepresented the backing assets for its stablecoin.

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Wall Street Journal Article