US Treasury Steps up Regulatory Scrutiny as Stablecoins Gain Wide Adoption

By: Eliza Bennet

Amid growing concerns over the potential use of stablecoins for illicit activities and threats to financial stability, US authorities have stepped up their monitoring of the digital currency landscape. Recently, US Treasury Deputy Secretary Adewale Adeyemo highlighted this concern, particularly calling out the increasing use of Tether's USDT stablecoin by Russia to bypass economic sanctions.

Unauthorized entities have exploited the relative freedom and anonymity offered by stablecoins, leading to an increase in illegal transactions. In response to these illicit activities, the US and UK governments have initiated a joint investigation into cryptocurrency transactions worth over $20 billion that may have violated Russian sanctions with connections to Tether's stablecoin.

Despite the risks associated with its coin present, Tether has confirmed its dedication to upholding compliance standards and ongoing collaboration with law enforcement to combat illegal financial operations. Furthermore, the Treasury Department proposed a series of reforms aimed at strengthening the government's ability to counteract terrorist funding using cryptocurrencies, thus addressing the security issue highlighted by Adeyemo in his testimony.

Simultaneously, as stablecoins continue to gain traction as a cross-border settlement mechanism, particularly on blockchains like Solana, a call for a comprehensive and consistent regulatory response has been issued by the Financial Stability Institute alongside the optimism surrounding the passage of a stablecoin law in the US expressed by Congressman McHenry.