U.S. Authorities Can Control Tether (USDT): JPMorgan

Financial services giant JPMorgan released a report asserting that U.S. authorities retain power to indirectly influence major stablecoin Tether despite its overseas base.

The bank’s analysts argue Tether remains vulnerable given its heavy reliance on the American market.

• Treasury sanctions forced Tether on the wallet blacklist.
• Stablecoin transparency is still lacking, per JPMorgan.
• Tether’s dominance is threatened by U.S. crypto regulation.

Specifically, JPMorgan notes that the Treasury Department’s sanctions arm, known as the Office of Foreign Assets Control (OFAC), compelled Tether to block wallets associated with mixer Tornado Cash in 2022.

Read more: Lazarus Group Shifts Crypto Money Laundering Technique: Report

OFAC sanctioned Tornado Cash in August 2022 for allegedly facilitating money laundering. Initially reluctant regarding blacklisting, Tether blacklisted the wallet after OFAC labeled privacy tool Tornado Cash a sanctions violation.

Tether CEO Criticizes JPMorgan Comments

However, Tether CEO Paolo Ardoino dismissed the concerns as jealousy while citing JPMorgan’s history of billion-dollar fines. Ardoino recently blasted the bank as hypocritical for criticizing Tether’s influence and lack of transparency.

“JPMorgan’s current concerns seem more related to the jealousy towards the evolution of financial and payment services, which they have been ignoring for a decade and now they’re upset because it got a lot of traction,” Ardoino said to The Block.

However, JPMorgan analysts said impending stablecoin rules in the U.S. and Europe seem likely to diminish Tether’s attractiveness over more transparent and compliant alternatives. 

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Additionally, the analysts voiced dissatisfaction with Tether’s current public disclosures, despite recent moves towards more transparency. 

Credit rating agency S&P Global also gives Tether a score of 4 out of 5 for its ability to maintain its 1:1 dollar peg. 

So while the stablecoin issuer operates offshore, JPMorgan analysts expect U.S. authorities to have channels to influence the dominant stablecoin’s behavior via sanctions.