Tether and Chainalysis roll out USDT monitoring solution to counter illicit transactions

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Tether has announced a collaboration with blockchain analytics firm Chainalysis to develop a customizable solution for monitoring secondary market activity.

The monitoring solution developed by Chainalysis will enable Tether to systematically monitor transactions and gain enhanced understanding and oversight of the USDT market. It will also serve as a proactive source of on-chain intelligence for Tether compliance professionals and investigators, helping them identify wallets that may pose risks or may be associated with illicit and/or sanctioned addresses.

Key components of the solution include Sanctions Monitoring, which provides a detailed list of addresses and transactions involving sanctioned entities, and Categorization, which enables a thorough breakdown of USDT holders by type, including exchanges and darknet markets.

The system also offers Largest Wallet Analysis, providing an in-depth examination of significant USDT holders and their activities, and an Illicit Transfers Detector, which is integral to identifying transactions potentially associated with illicit categories like terrorist financing.

“Cryptocurrency is transparent, and harnessing that transparency to partner with law enforcement and freeze criminal funds is the best way to deter its use for terrorism, scams, and other illicit activity,” shares Jonathan Levin, co-founder and Chief Strategy Officer at Chainalysis.

The move comes amid mounting pressure on stablecoins and digital assets, with global regulators eyeing these for their potential role in circumventing international sanctions and facilitating illicit finance.

As the most popular stablecoin with over $110 billion in circulation, USDT has faced increasing scrutiny from regulatory authorities. Tether claims that the partnership will enable it to “enhance compliance measures.” The stablecoin, which is pegged to the US dollar and backed primarily by US Treasury bonds, is managed by Wall Street trading house Cantor Fitzgerald.

“Tether remains steadfast in its dedication to upholding the highest standards of integrity, and this collaboration reinforces our proactive approach to safeguarding our ecosystem against illicit activities,” shares Tether CEO Paolo Ardoino.

A recent report from Reuters suggests that Venezuela’s state-run oil company has been using USDT to bypass US sanctions, while a United Nations report from January highlighted the stablecoin’s alleged role in underground banking and money laundering in East Asia and Southeast Asia. Notably, Tether has worked with 124 law enforcement agencies across 43 global jurisdictions to address concerns on the stablecoin’s use in illicit activities.

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