(Bloomberg) — Cryptocurrencies dipped across the board following a report that the US was investigating the issuer of the Tether stablecoin that underpins much of the trading in the digital asset world.
The US is investigating Tether Holdings Ltd. for possible violations of sanctions and anti-money-laundering rules, according to people familiar with the matter, the Wall Street Journal reported. Tether’s USDT token, which seeks to maintain a one-to-one peg with the dollar, dropped to around 99.81 cents.
Stablecoins play a crucial role as gateways to cryptocurrency markets because they’re an intermediary step for using fiat money to buy tokens like Bitcoin, and vice versa. They’re also often used as collateral for crypto loans.
Bitcoin, the largest cryptocurrency by market value, fell as much 3.3% to $65,878, after trading little changed for much of Friday. Solana slumped around 5.5%, while Dogecoin slipped about 5.6%.
“It appears to be in part a news-driven selloff today, as prices appear to have dipped around when the news was announced,” said Will Tamplin, senior analyst at Fairlead Strategies.
Tether’s USDT has a market capitalization of about $12O billion, and is the world’s most traded cryptocurrency. The activities of the closely-held firm has been under scrutiny for years, with critics saying it lacks transparency.
“These stories are based on pure rank speculation despite Tether confirming that it has no knowledge of any such investigations into the company. The article also carelessly glosses over Tether’s well-documented and extensive dealings with law enforcement to crack down on bad actors seeking to misuse tether and other cryptocurrencies,” a Tether spokesperson said in a statement. Tether Chief Executive Paolo Ardoino called the report “old noise” on the X social media platform.
The criminal investigation, run by prosecutors at the Manhattan U.S. attorney’s office, is looking at whether the cryptocurrency has been used by third parties to fund illegal activities such as the drug trade, terrorism and hacking, the Wall Street Journal reported.
In March, Bloomberg News reported that the US and UK are reviewing more than $20 billion of cryptocurrency transactions that passed through a Russia-based virtual exchange, according to people familiar with the matter, as part of allied efforts to crack down on the sanctions evasion that’s supporting Vladimir Putin’s war in Ukraine. The payments under scrutiny went through Moscow-based crypto exchange Garantex using Tether, the people said, speaking on the condition of anonymity to discuss a matter that hasn’t yet been made public. At the time, the people said there was no immediate suggestion of wrongdoing by Tether, which is incorporated in the British Virgin Islands, a British Overseas Territory.
“We won’t really know until next week whether or not this has a longer-term effect on the market, but I would guess it has very little long-term effect, given the market has become immune to regulatory tape bombs,” said Jeff Dorman, chief investment officer at Arca.
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