USDT Under Fire: New York Prosecutors Allege Tether Profits from Fraud, Igniting Regulatory Storm
In a significant escalation of regulatory pressure on the cryptocurrency industry, New York Attorney General Letitia James and Manhattan District Attorney Alvin Bragg have launched a direct attack against the world's largest stablecoin operators, Tether (issuer of USDT) and Circle (issuer of USDC). The prosecutors allege these firms are systemically exploiting regulatory gaps to generate billions in profits from interest on stolen funds, rather than facilitating the return of assets to victims. This move represents one of the most aggressive state-level actions against stablecoin issuers to date and signals a potential paradigm shift in how these crucial pillars of the crypto economy are supervised. The allegations center on the claim that Tether and Circle are not merely passive custodians of dollar reserves but active participants in a financial ecosystem where illicit funds are allegedly Leveraged for yield. This development coincides with legislative efforts in Congress, notably the referenced GENIUS Act, which aims to establish a federal framework for digital assets. The dual pressure from aggressive state prosecutors and pending federal legislation creates unprecedented uncertainty for stablecoins, which are foundational to trading, lending, and decentralized finance (DeFi). For a bullish practitioner, this news underscores the critical and inevitable maturation phase of crypto regulation. While short-term volatility and negative sentiment around USDT are probable, the long-term implication is the formalization and legitimization of the stablecoin sector. Clear rules, even if born from adversarial actions, reduce systemic risk and attract institutional capital. The focus must now be on how Tether and Circle respond to these allegations, the evidentiary basis of the claims, and the specific regulatory frameworks that emerge from this conflict. The outcome will likely define the operational and compliance standards for all stablecoins, potentially strengthening the position of transparent, fully-audited, and compliant issuers in the future financial landscape.
New York Prosecutors Accuse Stablecoin Firms of Profiting from Fraud
New York Attorney General Letitia James and Manhattan District Attorney Alvin Bragg have escalated their scrutiny of stablecoin issuers, alleging systemic exploitation of regulatory gaps. In a letter to Congressional leaders, the prosecutors contend that Tether and Circle—the two largest stablecoin operators—are generating billions in interest from stolen funds rather than returning assets to victims.
The GENIUS Act, signed into law in 2025 to stabilize the $160B stablecoin market, mandates asset backing but lacks clawback provisions for illicit transactions. This omission allows issuers to retain control of flagged assets while earning yield on Treasury holdings. "It’s a windfall for bad actors," the letter states, noting issuers’ 2024 revenue exceeded $6B from interest alone.
Market participants await potential legislative amendments as regulators push for stricter asset recovery protocols. The controversy highlights growing tensions between innovation and consumer protection in crypto’s most liquid sector.
Tether Partners with Opera to Expand Stablecoin Access in Emerging Markets
Tether has announced a collaboration with Opera to enhance stablecoin accessibility in developing economies. The initiative targets regions like Africa, Latin America, and Southeast Asia, offering mobile-first users a streamlined way to store and transfer dollar-denominated stablecoins without complex onboarding. "Tether’s mission has always been to provide simple, reliable access to stable value for people who need it most," said CEO Paolo Ardoino.
MiniPay, Opera’s integrated platform, now supports Tether’s USDT and Tether Gold (XAUT), the latter positioned as an inflation-resistant savings product. The platform operates in over 60 countries, with 12.6 million activated wallets and 350 million processed transactions. Q4 2023 saw 50% user growth, driven by emerging market adoption. In December alone, MiniPay facilitated over $153 million in transactions, reflecting rising demand for stable, dollar-based payments in mobile economies.
XAUT, backed by physical gold reserves, reached an all-time high of $5,600 in late January amid broader strength in gold markets. The partnership underscores the growing intersection of stablecoins and tokenized commodities in inflation-prone environments.
Hong Kong to Issue First Stablecoin Licenses in March as Regulatory Push Intensifies
Hong Kong’s financial regulators are poised to grant the first batch of stablecoin licenses by March, marking a pivotal step in the city’s ambition to become a regulated hub for digital assets. The Hong Kong Monetary Authority (HKMA) confirmed the limited issuance after nearly completing its review of over 30 applicants, including Ant Group’s offshore arm and Reitar Logtech.
The MOVE follows August’s Stablecoins Ordinance, which mandates licensing for any HKD-denominated or fiat-referenced stablecoin issuer. While the HKMA’s Chief Executive Eddie Yue emphasized a "very small number" of approvals, the decision signals institutional confidence despite mainland China’s crackdown on crypto-related activities.
Market observers note the licenses could catalyze demand for compliant stablecoins like USDT or USDC, though regulatory scrutiny remains high. The approvals may also spur trading volumes on licensed exchanges such as Binance and OKX, which have been vying for legitimacy in Hong Kong’s tightening framework.
