Tether Limited, the firm behind the Tether stablecoin, announced plans to move its headquarters to El Salvador to take advantage of the Central American country’s recent attempt to become a global hub for cryptocurrency.
Tether dominates the booming stablecoin market, offering a constant value pegged to traditional currencies and enabling users to transfer money between cryptocurrencies without facing price swings.
Paolo Ardoino, Tether’s CEO, said he will relocate to El Salvador after securing a license there as a digital asset service provider.
Ardoino and Tether’s managers and cofounders will also move their residences to El Salvador. Previously, the company operated from the British Virgin Islands.
“This move to El Salvador will be the first time we’re going to have also a physical headquarters,” he said. But not all of the company’s 100-plus employees will move there, he said, adding that many of the staff work remotely.
Ardoino also said the company plans to hire 100 Salvadorans over the next several years. Regulators have expressed concern over the booming stablecoin market, warning that growing stablecoin reserves increase risks to the broader financial system by serving as a bridge between the crypto universe and mainstream financial markets.
Questions have surrounded Tether’s reserves, as the company does not fully disclose their locations or forms. Tether states that Wall Street brokerage Cantor Fitzgerald holds the vast majority of its stablecoin reserves in traditional currencies. Howard Lutnick, Cantor Fitzgerald’s CEO, has been nominated to lead the U.S. Commerce Department under President-elect Donald Trump.
“So we have some liquidity on other banks, but the vast, vast majority of the T-Bills are in Cantor,” Ardoino said.
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Tether has had a checkered history
Tether has faced significant controversy throughout its history, raising questions about its reserves, transparency, and its role in the broader cryptocurrency ecosystem.
Tether’s main product is a stablecoin, USDT, designed to maintain a 1:1 peg with the U.S. dollar, offering traders and investors a way to move funds across cryptocurrency exchanges without exposure to volatility.
However, Tether’s credibility has often been under scrutiny. In the early years, the company claimed that every USDT in circulation was backed by an equivalent amount of U.S. dollars held in reserve. Yet, it did not provide independent audits to substantiate this claim. In 2018, Tether faced allegations of being undercapitalized and not having sufficient reserves to back the stablecoin it had issued. This lack of transparency led to suspicions that Tether may have been used to manipulate cryptocurrency prices.
In 2019, Tether settled with the U.S. Commodity Futures Trading Commission (CFTC) for $18.5 million after being accused of making misleading statements about the backing of its stablecoin. A subsequent legal case involving the New York Attorney General revealed that Tether had misled the public about its reserves. The case settled in 2021. Tether agreed to pay USD$18.5 million and pledged to provide more transparency about its reserves.
Despite these issues, Tether has become a major player in the cryptocurrency market, with billions of dollars in circulation. It has maintained a prominent role in facilitating trading and liquidity across the crypto space. However, its past has left a shadow of doubt over its operations, prompting ongoing calls for regulatory oversight.
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Over $3.5B worth of Tether used in illegal transactions in 2020
The stablecoin has often been linked to illegal activities due to its widespread use in cryptocurrency markets. Tether is sometimes used for money laundering, ransomware attacks, and other illicit transactions.
A 2021 report from the blockchain analytics firm Chainalysis revealed that over USD$3.5 billion worth of Tether was involved in illicit transactions in 2020. However, the majority of Tether transactions are still legal.
One notable instance occurred in 2020, when the U.S. Department of Justice charged the cryptocurrency exchange BitMEX with enabling money laundering. USDT transactions played a key role in the illegal flow of funds.
Additionally, Tether was tied to the 2021 ransomware attack on the Colonial Pipeline, with hackers demanding payment in USDT.
The company has since boosted its program to monitor how its tokens were used in order to combat illicit finance.
When asked if Tether had considered alternative locations for its headquarters, Ardoino said the company lacked a license to operate in the European Union and had ruled out the United States for now.
Trump’s victory in the November U.S. election sparked a record rise in cryptocurrency prices. The president has promised to create a more crypto-friendly regulatory environment and plans to establish a U.S. bitcoin strategic reserve.
El Salvador is positioning itself as a hub for digital currency trading. Three years ago, President Nayib Bukele made the country the first to adopt bitcoin as legal tender, alongside the dollar.
On Monday, Bukele also asked Chris Pavlovski, CEO of social media platform, Rumble Inc (NASDAQ: RUM), to consider moving the video-sharing platform’s headquarters to El Salvador.
USDT makes up roughly two-thirds of the USD$212 billion in stablecoins currently in circulation, according to CoinGecko data.
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