while rope USDT
-0.04%
According to JPMorgan, although they may not be U.S. entities, U.S. authorities can exercise some control over stablecoin issuers through the Office of Foreign Assets Control (OFAC).
“U.S. regulators could exercise some control over Tether’s overseas use through OFAC,” JPMorgan analysts led by Nikolaos Panigirtzoglou wrote in a report Thursday. “A good example is Tether’s association with Tornado Cash, a privacy-enhancing platform on the Ethereum network.”
OFAC, an agency within the U.S. Treasury, sanctioned Tornado Cash in 2022, claiming it was a key tool used by malicious actors to launder money. At the time, Tether said it would not block Tornado Cash addresses because the company had not yet received such a request from U.S. authorities. However, last December, Tether announced that it had frozen stablecoins held in OFAC-approved cryptocurrency wallets as a “proactive” security measure and ultimately caved to OFAC.
When asked for comment, Tether CEO Paolo Ardoino highlighted the company’s identical December announcement and suggested that JPMorgan appears to be jealous of Tether’s dominant position in the cryptocurrency market.
“JPMorgan’s current concerns seem to have more to do with jealousy over the evolution of financial and payment services. They’ve been ignoring it for the past decade, but are now upset because it’s gaining a lot of traction,” Ardoino said. “If I were them, I would be more worried about the $39 billion total in fines.”
Earlier this month, Ardoino labeled JPMorgan “hypocritical” when it said Tether’s increased concentration was negative for the cryptocurrency market.
JPMorgan expects Tether usage to decline due to upcoming stablecoin regulations.
Upcoming stablecoin regulations in the U.S. and Europe will impact the use of Tether, according to JPMorgan analysts. “These regulations are likely to put indirect pressure on Tether as increased transparency and better compliance with new regulatory/KYC/AML standards will reduce its attractiveness compared to stablecoins,” the analysts said. “This challenge to Tether will also apply to the DeFi space, where Tether is widely used as a source of collateral and liquidity.”
Analysts have also expressed dissatisfaction with Tether’s current disclosures, saying they do not do enough to allay concerns.
“Tether’s report still lacks a complete and detailed asset analysis and independent audit (instead of auditor assurance),” they said.
Analysts also highlighted S&P Global’s weak rating for Tether’s ability to maintain its peg to the US dollar at 4 (where 5 is weak and 1 is strong). Tether reported billions of dollars worth of profits last year due to high interest rates and rising underlying asset prices, but “there is significant price risk associated with assets other than U.S. Treasuries,” analysts said.
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