Morgan Stanley research team reiterated in its report that Tether needs to be more transparent and compliant with KYC/AML standards due to the upcoming stablecoin regulations, which will significantly weaken its attractiveness.
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Stablecoin Regulations on the Horizon, Tether Faces Challenges
The US Still Has the Means to Sanction Offshore Entities
US Regulatory Pressure Will Significantly Weaken USDT’s Appeal
Stablecoin Regulations on the Horizon, Tether Faces Challenges
According to CoinDesk, a research report released by JPMorgan Chase (JPM) on Thursday pointed out that Tether’s long-standing dominant position is under threat due to the imminent stablecoin regulations in the United States.
Earlier reports stated that during a closed-door meeting of the House Financial Services Committee, Federal Reserve (FED) Chairman Jerome Powell expressed optimism about reaching a consensus on stablecoin regulation. It is said that he stated, “We are close to reaching an agreement on stablecoin legislation.” (“Stablecoin Bill to Be Passed Soon!” Urgent Request from Federal Reserve Chairman Powell to Congress to Speed Up)
The US Still Has the Means to Sanction Offshore Entities
Although Tether is not registered in the US, a research team led by Nikolaos Panigirtzoglou at JPMorgan Chase pointed out that regulatory agencies can still exert a certain degree of control over its offshore entities through the US Office of Foreign Assets Control (OFAC).
The report cites the association with Tornado Cash as an example, stating that the US Treasury still has the means to include the crypto mixer Tornado Cash in the sanctions blacklist in August 2022 and accuse it of assisting money laundering.
The report states:
Although legal actions directly targeting offshore entities and decentralized companies are complex, indirect measures and international cooperation may hinder people from using Tether. (“Tornado Cash Developer to Be Detained for Another Three Months, Public Hearing to Be Held During This Period”)
US Regulatory Pressure Will Significantly Weaken USDT’s Appeal
The report reiterates that Tether needs to be more transparent and compliant with KYC/AML standards due to the arrival of stablecoin regulations, which will greatly weaken its attractiveness.
In particular, stablecoin regulations will be globally coordinated through the Financial Stability Board (FSB) for the G20, further restricting the adoption of Tether.
Despite Tether’s recent efforts to publish financial information, the report still believes that these disclosures are not sufficient to eliminate market concerns. (“Tether’s Q4 Excess Reserve Reaches $5.4 Billion, Expected to Earn $6.2 Billion in 2023”)
And this is not the first time Morgan Stanley’s research team has criticized Tether. (“Morgan Stanley Worries About Tether’s Dominant Position in Stablecoins”)
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