Tether, the company behind the USDT stablecoin, has joined forces with Chainalysis to closely monitor transactions of the popular stablecoin on secondary markets. This collaboration comes as stablecoin issuers face mounting pressure from regulators, prompting stakeholders to invest billions in combatting illicit activities within the crypto world. While criminal activities in the crypto space make up only a small portion of overall activity, efforts to eradicate them are intensifying alongside increased scrutiny from global regulators.
Tether recently announced the partnership with Chainalysis, a New York-based blockchain analytics firm. Chainalysis will develop customizable solutions to track the secondary market activity of USDT, which encompasses all transactions involving the stablecoin that do not involve Tether itself. This accounts for approximately 99.9% of the stablecoin’s activity.
Through Chainalysis solutions, Tether will be able to systematically monitor transactions, providing a deeper understanding and oversight of the USDT market. The partnership will also serve as a proactive source of intelligence for Tether’s compliance professionals and investigators, enabling them to identify wallets that may be associated with illicit or sanctioned addresses and pose potential risks.
The collaboration with Chainalysis is crucial for Tether, as USDT remains the largest stablecoin in the market, with a market cap of $110.94 billion, more than three times that of the second-place USDC. It has consistently ranked first in trading volume for years. For example, in the past day, USDT’s trading volume was $35.537 billion, double that of Bitcoin in second place and seven times higher than USDC.
However, Tether has faced regulatory scrutiny for various allegations over the years, including alleged Bitcoin manipulation and concerns about the stablecoin’s backing. The most significant risk for USDT, though, is its potential use in illicit activities. Recent cases involving major crypto players like Binance and BitMEX have demonstrated that the US government takes these accusations seriously.
The use of stablecoins in criminal activities is not a new phenomenon. According to a report by Chainalysis, stablecoins accounted for 70% of all crypto scams in the previous year and 83% of crypto sent to sanctioned entities. The report also highlighted that sanction evasion resulted in $24.2 billion in stablecoin volume over 2022 and 2023.
Andrew Fierman, the head of sanctions strategy at Chainalysis, explains that stablecoins become an attractive option in jurisdictions where access to the US dollar is restricted due to sanctions.
With prominent figures in the crypto industry facing legal consequences, such as CZ’s four-month prison sentence, it is crucial for Tether to ensure compliance in this new era of regulatory scrutiny.
This partnership is not only vital for Tether and USDT but also for the entire crypto industry, as the stablecoin accounts for a significant portion of all crypto transactions.
Over the weekend, the crypto market experienced sideways trading, with a slight increase in overall market cap from $2.225 trillion on Friday to $2.35 trillion at the time of writing. Bitcoin is currently trading at $63,745, recovering from the blow of CZ’s sentencing earlier in the week, when it dropped to $56,000.