In a letter dated October 65, 2023, US Senator Cynthia Lummis urged the Department of Justice (DOJ) to take action against Binance and Tether, two of the largest players in the cryptocurrency industry. Lummis accused them of engaging in illegal activities that pose a threat to the national security and financial stability of the United States
Lummis, who is a member of the Senate Banking Committee and a vocal supporter of Bitcoin, wrote that Binance and Tether have been operating in the US without proper registration and oversight, violating anti-money laundering and sanctions laws, facilitating market manipulation and fraud, and exposing investors to significant risks.
She cited several reports and investigations that have raised serious concerns about the legitimacy and transparency of Binance and Tether, such as:
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The DOJ’s ongoing criminal probe into Binance for allegedly allowing US customers to trade on its platform without complying with US regulations.
The New York Attorney General’s settlement with Tether and its affiliated exchange Bitfinex, which revealed that Tether had misrepresented the backing of its stablecoin USDT and had used it to cover up an $850 million loss.
The Financial Action Task Force’s (FATF) assessment that Binance and Tether are among the “red flag” entities that pose a high risk of money laundering and terrorist financing.
The Securities and Exchange Commission’s (SEC) lawsuit against Ripple, which alleged that Ripple sold its cryptocurrency XRP as an unregistered security and that Binance was one of the major platforms that facilitated the illegal sales.
Binance and Tether are two of the most prominent players in the cryptocurrency industry, but they are also facing serious legal troubles. The Department of Justice (DOJ) has reportedly asked the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS) to investigate whether Binance and Tether have violated any criminal laws, such as money laundering, tax evasion, or sanctions violations.
Binance is the world’s largest cryptocurrency exchange by trading volume, offering hundreds of digital assets and derivatives to millions of users around the globe. Tether is the issuer of the most widely used stablecoin, USDT, which is pegged to the US dollar and backed by reserves of cash and other assets. USDT is often used as a medium of exchange and a store of value in the crypto market, especially in countries with capital controls or unstable currencies.
However, both Binance and Tether have been accused of operating with a lack of transparency and regulatory compliance. Binance has been under scrutiny for allegedly facilitating illicit transactions, such as money laundering, terrorist financing, and market manipulation. The exchange has also faced regulatory actions and warnings from several countries, including the UK, Japan, Germany, Canada, and Singapore.
Tether has been under investigation for allegedly issuing more USDT than it can back with its reserves, creating a systemic risk for the crypto market. The company has also been sued by the New York Attorney General (NYAG) for allegedly concealing a loss of $850 million in funds that were supposed to back USDT. The NYAG has reached a settlement with Tether in February 2021, requiring the company to pay $18.5 million in fines and submit periodic reports on its reserves.
The DOJ’s request to criminally charge Binance and Tether is a significant escalation of the legal pressure on the crypto industry. If the DOJ decides to indict Binance and Tether, it could have serious consequences for both companies and their users. For instance, Binance could face asset freezes, fines, or even a shutdown of its operations in the US or other jurisdictions. Tether could face a loss of confidence in its stablecoin, leading to a run on its reserves or a collapse of its peg to the dollar.
The DOJ’s request also reflects the growing regulatory attention on the crypto space, as more governments and agencies seek to establish rules and standards for this emerging sector. The DOJ’s request could signal a more coordinated effort among different regulators to crack down on crypto-related crimes and protect consumers and investors from fraud and abuse.
The crypto industry is facing a critical moment in its history, as it balances innovation and growth with compliance and accountability. Binance and Tether are not the only ones under legal scrutiny, as other crypto companies and projects are also facing lawsuits, investigations, or regulatory actions. The outcome of these legal battles could shape the future of the crypto market and its role in the global financial system.
The Commodity Futures Trading Commission’s (CFTC) investigation into whether Binance offered illegal futures and derivatives products to US customers. Lummis argued that these actions by Binance and Tether have undermined the credibility and innovation of the cryptocurrency sector, which she believes has great potential to benefit the US economy and society. She urged the DOJ to “use all available tools” to hold Binance and Tether accountable for their “egregious violations” and to protect US consumers and national interests.
She also called on the DOJ to coordinate with other federal agencies, such as the Treasury Department, the SEC, the CFTC, and the Federal Reserve, to develop a clear and consistent regulatory framework for cryptocurrencies that would foster innovation while preventing abuse.
Lummis concluded her letter by stating that she is committed to working with the DOJ and other stakeholders to ensure that the US remains a leader in the development and adoption of cryptocurrencies, while also safeguarding its security and prosperity.