Ollie - The AML Watcher reposted this
Anti-financial Crime (ABC, AML/CFT, Sanctions) Expert at ACAMS | (Geo)political Risk | Corporate Intelligence & Investigations
[Free to read] "The federal government is investigating cryptocurrency company Tether for possible violations of sanctions and anti-money-laundering rules, according to people familiar with the matter", according to the Wall Street Journal (https://lnkd.in/eV8-W3MP). Also: "The criminal investigation, run by prosecutors at the Manhattan U.S. attorney’s office, is looking at whether the cryptocurrency has been used by third parties to fund illegal activities such as the drug trade, terrorism and hacking—or launder the proceeds generated by them." Meanwhile, according to the same article, "The Treasury Department, meanwhile, has been considering sanctioning Tether because of its cryptocurrency’s widespread use by individuals and groups sanctioned by the U.S., including the terrorist group Hamas and Russian arms dealers." For my recent close look at Tether's business, see a repost below.
Anti-financial Crime (ABC, AML/CFT, Sanctions) Expert at ACAMS | (Geo)political Risk | Corporate Intelligence & Investigations
The WSJ has an interesting piece out today about #Tether, internationally the most popular cryptocurrency stablecoins launched in 2014. With under 100 employees, the group of entities behind Tether have recently become more profitable, in absolute numbers, than the money management giant Blackrock Inc. Their net income per employee is, without surprise, unmatched by any company in the world. The article goes on to describe various use cases for Tether, from its use by Russia, Iran & Venezuela to either (illegally) circumvent US sanctions or (mostly legally) minimize their impact on ordinary, unsanctioned citizens in those countries to facilitating small & medium business in the South Caucasus nation of Georgia. Today, Tether has several #stablecoin's pegged to the US dollar (USDT), the euro (EURT), the offshore yuan (CNHT), the Mexican peso (MXNT) & gold (XAUT where "XAU" stands for "gold ounce"). USDT is obviously the most popular one, with the most liquidity. USDT is deployed on 16 blockchains, with most activity happening on Ton & Ethereum. In contrast, EURT is deployed on Ethereum &, with a tiny bit of liquidity, on Omni while the other Tether stablecoins run on just one blockchain each. I have decided to take a look at the economics of Tether, i.e., how it earns so much money in the 1st place. >> First of all, it is not possible to mine Tether. Each Tether is directly issued by Tether International Ltd (BVI) & Tether Ltd (Hong Kong), both subsidiaries of BVI-domiciled Tether Holdings Ltd, in exchange for 1 unit of the underlying asset, e.g., 1 USDT for $1. It is unclear how much it costs the issuing companies to release Tether, but unitary costs are likely much lower than the exchanged asset (i.e., 1 USDT costs <$1 to issue). This constitutes the first source of income. >> Accumulated underlying assets form reserves, which can theoretically be redeemed by Tether holders at any moment, thus guaranteeing price stability. As of Sep 10, total reserves amount to $118.4bn, with net equity at $5.3bn. The second source of income is interest earned on those reserves, also augmented by principal redemptions. As at June 30, most investments ($99.8bn) were in highly-liquid money market instruments, with the rest spread across corporate bonds, precious metals, Bitcoin, secured loans & other. Even under a very conservative investment strategy, modest 2-3% p.a. returns are enormous chunks of money given overall assets under management. >> Other sources of income include: a) fees off peer-to-peer transfers (paid by users), b) fees off fiat-to-Tether and opposite conversions (paid by exchanges), c) redemption fees for Tether burning, i.e., customer refunds accompanied by coin removal from circulation, d) network fees payable to Tether for acting as blockchain transaction validator, e.g., Super Representative on Ton, e) fees from third-party app integrations, f) investment income earned by other subsidiaries of Tether Holdings Ltd.