JPMorgan: US regulators can exert control over Tether through OFAC, regulatory impact on USDT attractiveness

JPMorgan: US regulators can exert control over Tether through OFAC, regulatory impact on USDT attractiveness

JPMorgan: US regulators can exert control over Tether through OFAC, regulatory impact on USDT attractiveness

According to a research report released by JPMorgan analysts, the US regulatory authorities can exert a certain degree of control over the overseas use of the stablecoin USDT, issued by Tether, through the Office of Foreign Assets Control (OFAC). In addition, the upcoming stablecoin regulations may bring “indirect pressure” to Tether.

JPMorgan stated in the report released on Thursday (15th) that the dominant position of USDT as the largest stablecoin is fragile due to its reliance on the US market and forthcoming regulations.

The report mentioned that although Tether, the issuer of USDT, is not headquartered in the United States, regulatory authorities can exert a certain degree of control over its overseas use through the Office of Foreign Assets Control (OFAC).

The bank stated that the association between USDT and the decentralized coin mixer Tornado Cash is an example of this, and mentioned that OFAC will include this coin mixing protocol running on the Ethereum network in the sanctions list in August 2022, on the grounds that it continues to serve as a money laundering tool for cybercriminals.

The team of analysts led by Nikolaos Panigirtzoglou wrote that the upcoming stablecoin regulations may bring “indirect pressure” to Tether, as the attractiveness of Tether will weaken compared to stablecoins that have higher transparency and comply with new KYC/AML standards. The analysts also pointed out that this issue also applies to decentralized finance (DeFi), where USDT is used as collateral and a source of liquidity.

The report stated that Tether faces pressure to increase transparency in its reserve investments and has been working to disclose real-time data. However, JPMorgan stated that the information recently disclosed by Tether is not sufficient to alleviate people’s concerns.

Regarding JPMorgan’s latest views, Tether CEO Paolo Ardoino refuted the negative impact of the growing dominance of USDT in the cryptocurrency field, stating that “the world’s largest bank, JPMorgan, talking about concentration seems a bit hypocritical to me.”

In response to JPMorgan’s latest remarks, Ardoino stated in an interview with The Block that the investment bank seems to be jealous of Tether’s dominant position in the cryptocurrency market.