Morgan Stanley analysts believe that the U.S. regulatory agency can exert a certain level of control over the overseas use of Tether, the issuer of the stablecoin USDT, through the Office of Foreign Assets Control (OFAC). In addition, upcoming stablecoin regulations may bring “indirect pressure” to Tether.
According to a report by CoinDesk, Morgan Stanley stated in a research report released on Thursday (15th) that the dominant position of USDT as the largest stablecoin is fragile due to its reliance on the U.S. market and upcoming regulations.
The report stated that although Tether’s headquarters are not in the United States, regulatory agencies can exert a certain level of control over its overseas use through the Office of Foreign Assets Control (OFAC).
The bank stated that the association between USDT and the cryptocurrency mixer Tornado Cash is an example of this, and mentioned that OFAC will include this mixing protocol running on the Ethereum network in its sanctions list in August 2022, citing the reason that it continues to serve as a money laundering tool for cybercriminals.
The analyst team led by Nikolaos Panigirtzoglou wrote that upcoming stablecoin regulations may bring “indirect pressure” to Tether, as its attractiveness will weaken compared to stablecoins that have higher transparency and comply with new KYC/AML standards. The analyst also pointed out that this issue also applies to decentralized finance (DeFi), where USDT is used as collateral and a source of liquidity.
The report stated that Tether faces pressure to increase the transparency of its reserve investments and has been striving to disclose real-time data. However, Morgan Stanley stated that the information recently revealed by Tether is not sufficient to alleviate people’s concerns.
Morgan Stanley previously stated that the growing dominance of USDT is negative for the cryptocurrency industry, but Tether CEO Paolo Ardoino later rebutted this claim, stating, “The world’s largest bank, Morgan Stanley, talking about concentration issues, seems a bit hypocritical to me.”
Regarding Morgan Stanley’s latest views, Ardoino stated in an interview with The Block that the investment bank seems to be jealous of Tether’s dominant position in the cryptocurrency market.
