Tether and Chainalysis to Roll Out Monitoring System in Targeting Illicit Activities and Compliance

Tether, the issuer of the largest stablecoin USDT, announced its collaboration with blockchain surveillance firm Chainalysis to bolster the monitoring of transactions involving its tokens on secondary markets.

This surveillance system encompasses compliance with international sanctions and the detection of illicit transfers, such as those linked to activities like terrorist financing.

According to Tether's blog post, this partnership aims to enable Tether to identify crypto wallets that could pose risks or may be associated with illicit and/or sanctioned addresses.

Tether CEO Paolo Ardoino expressed:

“Our collaboration with Chainalysis marks a pivotal step in our ongoing commitment to establishing transparency and security within the cryptocurrency industry. Tether remains steadfast in its dedication to upholding the highest standards of integrity, and this collaboration reinforces our proactive approach to safeguarding our ecosystem against illicit activities."

Tether's Strategic Move to Enhance Compliance Measures

The initiative underscores Tether's commitment to enhancing transaction surveillance, particularly in identifying and mitigating risks associated with illegal activities and sanctions violations amidst increasing regulatory scrutiny worldwide.

Developed by Chainalysis, the new system will empower Tether to monitor, track, and analyse transactions across secondary markets where USDT is traded.

By leveraging advanced tools for sanctions monitoring and illicit transfer detection, the initiative seeks to identify potentially risky wallets and transactions that may be linked to sanctions lists or involved in money laundering and terrorist financing.

Jonathan Levin, Co-Founder and Chief Strategy Officer, Chainalysis, added:

“Tether's proactive commitment to monitoring the secondary market for USDT – the world’s most popular cryptocurrency – has the potential to transform the entire ecosystem and make it a safer place to transact. Cryptocurrency is transparent, and harnessing that transparency to partner with law enforcement and freeze criminal funds is the best way to deter its use for terrorism, scams, and other illicit activity."

The New Monitoring System Consists of Four Tools

Tether has unveiled a comprehensive suite of tools as part of its new solution, aimed at enhancing security and transparency in cryptocurrency transactions.

Outlined in an announcement on its website, these tools include Sanctions Monitoring, which will identify addresses and transactions involving sanctioned entities, and the Illicit Transfer Detector, designed to flag transactions potentially linked to activities like terrorism financing.

Additionally, the solution features Categorisation, enabling the classification of Tether holders by type, such as exchanges or darknet markets, and Largest Wallet Analysis, which will focus on scrutinising the activities of "significant" USDT holders.

Such analysis plays a crucial role in uncovering the distribution and movement patterns of large volumes of USDT, a pivotal aspect in identifying anomalies and potential threats.

Tether's proactive initiatives, including its collaboration with 124 law enforcement agencies spanning 43 jurisdictions, underscore the company's commitment to upholding stringent compliance and monitoring standards.

Increasing Regulatory Pressure on Stablecoin Operators

Amidst mounting regulatory scrutiny worldwide, Tether has taken significant steps to bolster its transaction monitoring capabilities.

Concerns have surfaced regarding the potential exploitation of USDT for circumventing international sanctions and facilitating illicit financial operations.

This concern reached a boiling point with a letter sent by pro-crypto US Senator Cynthia Lummis to Attorney General Merrick Garland.

Senator Lummis demanded an investigation into Tether and Binance's alleged role in facilitating the Hamas attacks on Israel in October.

This move, co-signed by Representative French Hill, specifically accused Tether of "knowingly facilitating violations of applicable sanctions laws."

In addition, allegations have emerged suggesting the misuse of USDT by Venezuela's state-owned oil firm to evade United States (US) sanctions.

Moreover, a recent UN report shed light on the widespread adoption of USDT in clandestine banking and money laundering across East Asia and Southeast Asia.

In response to these challenges, Tether has opted for a proactive approach to fortify its compliance infrastructure.

By leveraging Chainalysis's technology, Tether aims to uphold the integrity of its platform and mitigate the risk of illicit activities.

In doing so, Tether aligns itself with broader industry efforts aimed at safeguarding the cryptocurrency ecosystem's integrity.