Tether’s USDT Was Meant for Financial Inclusion—Now It’s at the Center of Global Crime Networks
Is Tether fueling global crime? A recent investigation by The Economist suggests that USDT, originally launched to support financial inclusion, has become a go-to tool for money laundering, bypassing traditional banking restrictions and regulatory oversight.
From Crypto Idealism to Criminal Infrastructure
What began as a mission to democratize finance has taken a darker turn. In a sweeping operation named Operation Destabilise, law enforcement agencies from Europe, the U.S., and the Middle East uncovered a money-laundering network using USDT as its backbone.
At the center of the scheme is Yekaterina Zhdanova, a Russian businesswoman who allegedly orchestrated the conversion of illicit cash—mainly from drug sales—into USDT. Her network gathered physical money across Western Europe and funneled it to sanctioned Russian entities, including oligarchs and intelligence affiliates. In return, these clients wired payments to her accounts in Russia, and she settled debts using Tether’s USDT tokens, exploiting its speed, anonymity, and low fees.
Why USDT Is So Effective for Money Laundering
The appeal of USDT for bad actors is clear. Unlike traditional financial transfers that are slow, expensive, and closely monitored, Tether’s blockchain-based stablecoin allows near-instant movement of large sums with minimal scrutiny. While traditional launderers charge at least 10% fees, Zhdanova operated at under 3%, undercutting the competition.
USDT transactions leave a visible trail on the blockchain, but law enforcement often arrives too late to intercept the funds. According to cyber intelligence officials, the best investigators can do is reconstruct the trail after the crime, not prevent it.
Tether’s Response and the Growing Compliance Debate
Tether claims it’s doing its part. The company has frozen $2.5 billion in suspected illicit funds and formed a crime-fighting alliance called T3 with Tron and TRM Labs. In 2024, it also partnered with Chainalysis to bolster monitoring of USDT activity on secondary markets.
CEO Paolo Ardoino insists that Tether cooperates with law enforcement and prioritizes requests from jurisdictions like the U.S. However, The Economist highlights a troubling detail: requests from so-called “tyrannical countries” are often ignored, raising serious questions about selective compliance.
This has drawn criticism from both regulators and analysts, who argue that financial institutions should not decide which countries to cooperate with. If Tether operates in a jurisdiction, it should comply with local regulations, no exceptions.
Scaling Problems and Regulatory Blind Spots
Despite its promises, Tether’s compliance team is alarmingly small. The internal T3 group reportedly has only 20–30 staff members, while the company onboards up to 40 million users per quarter. For comparison, traditional banks like HSBC employ thousands in compliance departments to keep up with regulations.
Tether’s headquarters in El Salvador complicates enforcement. Operating in what’s effectively a “supranational cloud”, the company can sidestep many national legal obligations, making it difficult for regulators to compel cooperation.
US Authorities Launch Investigations
In 2024, the Wall Street Journal reported that U.S. authorities are probing Tether for possible sanctions and AML violations. Although Ardoino denied wrongdoing, the pressure is mounting. In May, New York prosecutors charged multiple individuals, including a Cartier heir, for laundering drug money through USDT.
Conclusion: A Stablecoin Caught Between Two Worlds
Tether’s USDT is both a financial innovation and a regulatory nightmare. While it brings speed and inclusion to the crypto world, it also offers an efficient vehicle for criminals to bypass financial safeguards.
As regulators worldwide begin to scrutinize stablecoins, Tether finds itself at a crossroads. It must either embrace full transparency and oversight, or risk becoming the poster child for unchecked crypto abuse.
