• Fri. Jun 21st, 2024

UNODC: Money Launderers Prefer USDT for Transactions

Walter Swift

ByWalter Swift

Jan 16, 2024

In a January 15 report, the United Nations Office on Drugs and Crime (UNODC) flagged the largest stablecoin by market cap, the USDT, for aiding scammers and money launderers in Southeast Asia.

This report is barely surprising, as Tether, the parent company behind USDT, has struggled to stay out of trouble over the past few years. From allegations of aiding criminals to widespread use by illegal online casinos, a harmless UN report might be the least of the problems.

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On the bright side, Tether, the company behind the USDT, has a history of collaborating with authorities, with the company freezing $225 million worth of USDT in wallets linked to a human trafficking group.

The Report Decries Rising USDT Scams and More

The UNODC report points towards illegal online gambling platforms as the most popular money laundering vehicle for bad actors. It also decries the wide usage of the stablecoin in pig-butchering scams, which is unsurprising since it tends to cover illicit transactions neatly.

While admitting the recent positive strides of international law enforcement in disrupting illegal money operations via Tether, the report pointed out how regulators are simply not keeping up with money launderers and other bad actors.

What is the USDT and Tether?

USDT is a stablecoin pegged 1:1 with the US dollar, released by Tether Limited Inc. in 2014, making it one of the first stablecoins in circulation. Stablecoins have a simple but unique idea: to create cryptocurrency tokens equal to the US dollar in value.

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Tether achieves this peg through full collateral backing in real US dollars. In short, for every USDT in user wallets, a matching amount of fiat US dollars exists somewhere to ensure all users can redeem the value of their USDT tokens in US dollars whenever they want.

Tether has lost its peg (below $1) several times in its lifespan. It has proven to be the most resilient stablecoin, making it the top cryptocurrency token investors use when entering and exiting trading positions.

However, while Tether thought it was building a perfect digital model of the dollar, Southeast Asian criminals saw something very different, instead seeing the cryptocurrency as a convenient way to bypass law enforcement without dealing with the frustratingly volatile nature of the average cryptocurrency token.

Why is Tether so targeted?

Bad actors generally perceive cryptocurrencies as convenient tools, as they tend to keep transactions relatively anonymous. However, they can be difficult for users to wrap their heads around, with the seemingly arbitrary price fluctuating ever so steadily.

USDT solves many inherent challenges by maintaining a peg to the US dollar, eliminating disagreements on its value. Digital currencies with volatility out of the way and anonymity still firmly in place sound convenient to the average user and are a goldmine for bad actors.

Online gambling sites were the first to jump on the train, allowing users to deposit and withdraw anonymously in USDT. Then came the money launderers, who would deposit millions into these casinos. The tokens would then be withdrawn as seemingly legitimate jackpot winnings, completely outsmarting law enforcement agencies around the globe.

Today, Tether is an invaluable tool to all kinds of bad actors in Southeast Asia, from human traffickers to romance scammers and money launderers, with law enforcement struggling to catch up.

What’s Next?

The report will drive positive change in USDT, especially concerning money laundering and terrorism financing, as Tether will take active steps to redeem its image among wallet holders. The UN report will likely rustle feathers within its leadership, setting the stage for widespread policy changes.

Tether’s commitment to keeping its digital currency safe and free from bad actors is apparent, from its 2023 freeze of $225 million allegedly linked to human trafficking to its collaboration with Singaporean authorities that saw the platform dismantle a chain of money laundering networks, recovering $737 million cash in the process.

According to blockchain analysis platform Dune Analytics, Tether has banned no less than 1,260 addresses linked to illicit activity, retrieving approximately $875 million in funds.


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Walter Swift

Walter Swift

Walter Swift is an adept crypto writer, known for his deep insights into the decentralized world. His pieces artfully break down complex blockchain topics, making them accessible to a broad audience. With a passion for emerging technologies, Walter's articles are a beacon for crypto enthusiasts and novices alike.

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