In a financial landscape increasingly shaped by digital currencies, regulators are voicing concern over the role of USDT, a popular stablecoin known as Tether, in potential money laundering schemes. As investigations into Thailand’s iCon Group escalate, the focus has turned to USDT’s appeal to both businesses and criminal networks, given its ease of use, low fees, and relative stability.
Amid suspicions of financial misconduct, Thailand’s Anti-Money Laundering Office recently examined 247 million USDT transactions, equivalent to over 8 billion baht, tied to the company. Authorities suspect that iCon Group may have exploited the cryptocurrency to obscure and transfer funds. This scrutiny follows the arrest of company executives and the seizure of various assets, with investigators identifying suspicious USDT transfers after the company’s leadership was detained.
The Appeal of USDT in a Digital Economy
USDT, issued by Tether Inc., is pegged to the US dollar, which stabilizes its value compared to other volatile cryptocurrencies like Bitcoin and Ethereum. Launched in 2014, Tether now dominates stablecoin markets with approximately 70% market share, and it reportedly serves over 350 million users globally. This popularity stems from its utility in international transactions, where it offers a fast, cost-effective alternative to traditional banking methods, which typically involve financial intermediaries and costly fees.
Beyond these advantages, however, USDT faces criticisms about the transparency of its fiat reserves, with critics questioning Tether Inc.’s claims regarding its backing by actual dollar reserves. Despite such concerns, businesses worldwide turn to stablecoins like USDT to sidestep the complexities of international money transfers, especially those that require cross-border currency exchanges.
“Whether a transaction is money laundering depends on the purpose of the transfer. It is not money laundering in all cases,” remarked a source familiar with cryptocurrency operations, who requested anonymity.
Crypto’s Double-Edged Sword: Convenience and Risk
A report from the UN this year highlighted the growing preference for USDT among certain criminal groups. The appeal lies in its privacy, ease of cross-border remittance, and low fees, which make it a convenient tool for activities like online gambling. With its pegged value to the US dollar, USDT remains stable, providing a viable option for criminals to launder funds without significant risk of loss.
Money laundering via cryptocurrency typically follows a layered approach. First, illicit funds are exchanged for cryptocurrency; then, the money is transferred through multiple accounts to make tracing difficult. Finally, it is integrated into the economy by purchasing luxury assets such as branded goods, high-end vehicles, or real estate.
“Converting USDT into valuable assets is one way to maintain the value of capital in the long term,” the source added, noting that USDT’s long-term stability remains questionable due to inflationary pressures.
Tracing USDT Transactions
Though USDT transactions offer a degree of privacy, they are not entirely anonymous. Blockchain technology enables authorities to track these transactions using blockchain explorers like Etherscan or Tronscan, allowing them to identify wallet addresses involved in suspicious activities. However, anonymity remains a hurdle, as blockchain wallets only reveal transaction destinations, not the identity of owners.
The solution, according to the source, lies in regulatory practices such as the know-your-customer (KYC) process. Exchanges regulated by the Securities and Exchange Commission (SEC) are required to verify users’ identities, which could deter money laundering attempts through registered platforms. The SEC recently requested digital asset exchanges to report suspicious behavior, a move aimed at curbing illegal activities in the crypto market.
Thai Digital Asset Operators Trade Association (TDO) President Att Tongyai Asavanund acknowledged that the unique nature of cryptocurrency appeals to illicit actors due to its ease of transfer and low cost. However, he argued that the extent of money laundering through digital currencies remains relatively low, comprising only about 1% of global money laundering activities. “Cash is still the most commonly used form of money laundering,” Mr. Att observed, underscoring that fiat currency remains the primary tool in illicit finance.
Stablecoin’s Position as a Market Staple
Tether, with a market capitalization that places it among the top three cryptocurrencies globally, continues to be a mainstay in digital finance. As of early November, USDT represented over 20% of the global cryptocurrency market, following only Bitcoin and Ethereum. The stability and accessibility of USDT make it an invaluable asset in the crypto space, though its popularity also brings increased scrutiny from regulatory bodies worldwide.
As the global market grows, so does the need for effective oversight of digital currencies, especially in regions like Asia, where crypto adoption rates are high. With regulatory bodies calling for greater transparency and cooperation from exchanges, the landscape of digital finance may see significant shifts aimed at balancing innovation with security.
