US Justice Department investigating Tether for potential bank fraud! The US Justice Department is reportedly investigating Tether Ltd. For possible bank fraud by executives of the company, stemming from actions during the early days of its stablecoin cryptocurrency, according to Bloomberg News.
The probe has implications for the cryptomarket – Tether is the third largest digital asset by market cap, at $62.3 billion, according to CoinGecko. Traders often use it instead of dollars or other fiat money to buy bitcoin and other cryptocurrencies. It also helps offer some level of protection from other cryptocurrencies’ price volatility.
The DOJ’s investigation is focused on activity from Tether’s early days – the question at hand is whether the company misled banks by hiding the fact that transactions were linked to cryptocurrency. Federal prosecutors have sent letters in recent months to individuals alerting them to the fact that they are targets of this investigation and that a decision on the probe could be made soon.
Depending on the outcome of the investigation, it could lead to stricter oversight of stablecoins by regulators and more transparency in how digital assets are backed, transacted, and traded.
Tether was created in 2014 in response to one of the biggest challenges for crypto start-ups at the time: bank de-risking. Most businesses handling cryptocurrencies had difficulty obtaining bank relationships because financial institutions are highly regulated – they feared doing business with companies that could potentially be tied to illicit activities.
Tether has long been controversial – there have been concerns for years that it does not carry the reserves to justify its peg to the US Dollar 1:1. In February, Tether agreed to pay $18.5 million dollars in fines to end a New York probe over allegations that the company moved hundreds of millions of dollars to cover up $850 million in losses.
Stablecoins, however, are growing in popularity – but along with their growth in popularity, their scrutiny also increases as well. Treasury Secretary Janet Yellen and the President’s Working Group on Financial Markets discussed the potential role that stablecoins may play in the financial system in the future.
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