Cryptocurrency has expanded the financial universe with modern and efficient solutions. Starting with Bitcoin in 2009, the crypto landscape experienced multiple digital tokens based on blockchain technology. Blockchain serves as a secure and robust digital locker for the transaction record of digital assets, including cryptocurrency, Non-Fungible Tokens (NFTs), and so on.
The primary selling point of cryptocurrency was security and transparency, distinguishing it from conventional finances. The decentralised architecture of cryptocurrency gives crypto every quality it has. However, decentralisation comes with several extrinsic vulnerabilities, such as crypto scams, wallet draining, and more.
A recent report from the United Nations Office on Drugs and Crime (UNODC) accused Tether (USDT) of being a go-to option for money launderers and scammers in Southeast Asia and the Pacific. It doesn’t mean that the USDT is an evil token or that the Tether crypto platform has unlawful involvement. The story is contradictory to what you may assume. Read on to have a clear understanding of the story.
Tether – Cryptocurrency Platform and Crypto Token
The foundation of cryptocurrency is decentralisation due to its existence on a blockchain, eliminating the intermediaries and influence of central authorities. Fiat currency, like the U.S. dollar or other currency, is entirely contradictory to its concept. Decentralisation has developed an interval between conventional currency and crypto.
To bridge the gap, Tether has come to the rescue with its existence on the Tron blockchain. This stablecoin features a distinctive pegging system, meaning that each USDT equals a fiat currency, the U.S. dollar. This feature ensures the stability of a conventional currency without compromising on the decentralised mechanism of the stablecoin. The pegging system guarantees the fiat currency reserves with the issuing organisation, Tether Limited.
Cryptocurrency exchanges, including Binance, ByBit, and so on, use stablecoin as a gateway for investors and traders to carry out crypto deals. USDT is a renowned and widely used stablecoin with 6.86 per cent of the market capitalisation share in the entire crypto market. As per Statista, Tether has a market cap of 66.32 billion U.S. dollars, while the entire stablecoin market cap is estimated at 154.23 billion U.S. dollars.
Tether Cryptocurrency – A Favourite Choice for Scammers
Fraudulent and illicit activities globally have made it hectic for fair finances. Every industry faces multiple problems at the hands of malicious actors. Cryptocurrency is no exception, but it is quite a different case. Unlike other industries, the crypto world faces dual threats. Scammers attack the crypto market and also use crypto for illicit purposes.
Therefore, the UNODC has developed a report covering the illegal activities in Southeast Asia and the Pacific. According to the UNODC, cyber fraud, illicit online gambling, money laundering, and other hazardous activities are in full bloom despite strict regulation and actions from law enforcement institutions.
It maintains that law enforcement actions have shifted the attention of money launderers and scammers toward the use of cryptocurrency. Scammers favour the USDT, which offers anonymous, fast, and reliable financial transactions, paving the way for them to continue their finances unnoticed. Thus, the UNODC has urged the Tether crypto platform to give attention to the matter for a timely solution.
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How Does Money Laundering Affect Financial Markets?
The monetary market functions on a few pillars, including trust, fair business operation, and equal exchange of assets. The lack of a single factor can lead to economic instability, adversely impacting every market member.
Money laundering, financial scams, crypto fraud, and other evil incidents harm the corporate reputation. Here are several effects of money laundering on financial markets.
#1. Trust Erosion
Illicit activities from any member adversely impact the trust and integrity of the market. Individuals and institutions fear the affected market, leading to the withdrawal of capital and assets. It alleviates the liquidity and efficiency of the monetary market.
Linking Tether cryptocurrency with money laundering and other unlawful events may lead to panic selling since no investor holds an asset with a negative buzz. Consequently, uncontrolled price fluctuation will occur, inducing heightened market volatility.
Also Read: DeFi 3.0 Introduces a New Way to Hedge Crypto Assets Against Volatility
#2. Market Integrity and Reputation Risks
Furthermore, this trust erosion will keep investors and traders away from the target cryptocurrency, reducing its market cap and performance. Click here to learn more. Crypto faces consistent backlash from traditional finances, and such activities will put it into the ground.
The weakened liquidity of cryptocurrency will reduce the financial capability of the state due to less investment and capital gain. Consequently, consumers, investors, and government institutions will lose revenue, weakening the entire financial system.
3. Regulatory and Compliance Challenges
Governments necessitate regulatory measures to counterfeiting illicit activities in society. Know Your Customer (KYC) and Anti-Money Laundering (AML) are among the top-class measures every financial enterprise uses to become eligible to offer products and services.
The pervasive use of Tether for money laundering and other unlawful ventures will tighten these regulatory requirements, making it hectic for users and crypto organisations to keep up quality services. It will result in the hesitation from crypto enthusiasts and investors to engage in the crypto market.
Thus, the overall functionality of the economic system will deteriorate, causing less efficiency and low revenue. Therefore, regulatory authorities and crypto issuers must join hands to decipher any vulnerability in the Decentralised Finance (DeFi), including cryptocurrency and other digital assets.
Tether Cryptocurrency About the UN Accusation
The UNODC report has put Tether on the frontline of criticism and backlash, making it respond to the accusation. Tether maintains that it takes required measures to control any unlawful venture under its radar. It has frozen crypto wallets worth millions with its engagement in illegal undertakings.
It further demands the UNODC come under the table to discuss measures for proactively controlling the money laundering, scams, and other harmful exploitation of USDT. It is worth mentioning that Tether is facilitating developing economies in emerging financial markets by offering stabilised cryptocurrency.
Nevertheless, strict control over malicious actors and scammers is the need of the hour as they harm the market, affecting individuals and organisations.