Tether responds to allegations
Tether has responded to recent allegations made by The Wall Street Journal (WSJ) that the company falsified bank documents and used shell companies to open bank accounts four years ago. The WSJ alleged that Tether and its sister company, Bitfinex, falsified invoices and contracts in late 2018, allowing them to open nine new bank accounts for shell companies in Asia over nine days.
Tether responded by calling the allegations “wholly inaccurate and misleading” and a “ton of misinformation and inaccuracies.” The stablecoin issuer added that these were just more fear, uncertainty, and doubt (FUD) tactics from the media outlet. This is not the first time Tether has responded to WSJ for disinformation and FUD. In December, the company denied WSJ reports that called out Tether for having potentially unreliable reserves for its secured loans. Tether said its loans were overcollateralized by extremely liquid assets and planned to reduce secured loans to zero by the end of 2022.
Tether and Bitfinex chief technology officer Paolo Ardoino tweeted on March 3 that the report had “misinformation and inaccuracies” and called the WSJ reporters clowns.
I'm at the PlanB anniversary in #lugano— Paolo Ardoino 🍐 (@paoloardoino) March 3, 2023
So much energy and people excited to talk about #Bitcoin
While I was on on stage I heard some clown honks, pretty sure was WSJ.
As always ton of misinformation and inaccuracies. Poor guys, must be difficult be them but need better media.
WSJ reporters heading to work in the am: pic.twitter.com/rlLF7mllYm— Stuart Hoegner (@bitcoinlawyer) March 4, 2023
The accusations against Tether came after the collapse of Crypto Capital Corp, which had ties with several crypto entities, including Tether and Bitfinex. Tether and Bitfinex were accused of using various means to skirt controls that would have restricted them from financial institutions that would have been an existential threat to their business. One leaked email suggests that the firm’s China-based intermediaries were attempting to “circumvent the banking system by providing fake sales invoices and contracts for each deposit and withdrawal.”
Tether and Bitfinex have world-class compliance programs and adhere to applicable Anti-Money Laundering, Know Your Customer, and Counter-Terrorist Financing legal requirements. The company is also a proud partner with law enforcement and routinely and voluntarily assists authorities in the United States and abroad.
The accusations against Tether came at a time when crypto firms are reliving how difficult it is for them to access banking services. Crypto-friendly bank Silvergate Capital Corporation recently became the subject of intense scrutiny amid operational issues, causing several crypto firms, including Coinbase and Kraken, to abandon the bank and its services.
It is interesting to note that Tether and Bitfinex’s response to the allegations is not to address the specifics of the WSJ report but to deny its veracity and attack the media outlet, calling it FUD. This tactic could be interpreted in several ways. First, Tether and Bitfinex may be trying to protect their reputation and prevent the media’s portrayal of them as less than reputable. Second, the companies may be trying to shift focus from the allegations by discrediting the source. Lastly, Tether and Bitfinex may be genuinely concerned that the WSJ report could damage their reputation and market position. Whatever their reasoning, Tether and Bitfinex’s response could indicate that the allegations are damaging and that they are attempting to mitigate any reputational harm.
Ongoing issues in crypto
The allegations against Tether and Bitfinex highlight the ongoing issues that crypto firms face when trying to access traditional banking services. The collapse of Crypto Capital Corp and the accusations against Tether and Bitfinex show how difficult it can be for crypto firms to access banking services and maintain relationships with financial institutions. This is not the first time that crypto firms have faced issues with traditional banks, and it likely won’t be the last. As long as cryptocurrencies remain outside of the traditional financial system, they will continue to face challenges in accessing banking services.
Tether and Bitfinex’s response to the allegations made by The Wall Street Journal highlights the challenges that crypto firms face in accessing traditional banking services. While Tether denies the allegations made against them, their response could indicate that they are concerned about the reputational harm the allegations could cause. The ongoing issues that crypto firms face in accessing banking services are a reminder that the cryptocurrency industry is still largely unregulated and lacks the clear legal frameworks that traditional financial institutions have to comply with.
Furthermore, the lack of regulatory oversight and the anonymity provided by cryptocurrencies have made them a favored tool for money laundering and other illicit activities. This has led to increased scrutiny from regulators and financial institutions, making it harder for crypto firms to access banking services.
Addressing the challenges
In order to address these challenges, the crypto industry needs to work towards establishing clear regulatory frameworks and improving transparency and accountability. This can help build trust and credibility with traditional financial institutions, making it easier for crypto firms to access banking services.
Additionally, crypto firms can also explore alternative banking solutions such as establishing partnerships with banks that are more open to working with the industry, or leveraging decentralized finance (DeFi) platforms that provide banking services without the need for traditional banks.
Overall, the challenges that crypto firms face in accessing banking services highlight the need for greater collaboration and cooperation between the crypto industry and traditional financial institutions, as well as the importance of establishing clear regulatory frameworks to ensure the long-term viability and sustainability of the cryptocurrency industry.