The timing of Tether-based (USDT) transactions from cold wallets raises eyebrows about potential payments by crypto exchange Binance amid the $4.3 billion announced by the Department of Justice (DoJ).
The huge amount and timing points to likely remittance by Binance weeks before finalizing the settlement. In particular, the $3.9 billion transaction in USDT executed on November 9 closely matches the $4.3 billion penalty Binance would settle with the Justice Department.
Binance Involved in Colossal Transaction Completed in USDT
A detailed scrutiny of the transaction shows that the Binance cold wallet involved in the trade currently has $6.6 billion. The Binance-Cold 2 wallet currently has $4 billion in USDT, with the remaining $2.6 held in various stablecoins, including USD Coin (USDC), Decentralized USD (USdd) and TrueUSD (TUSD).
Further analysis shows that the destination wallet (Binance 3) holds assets, mainly Tether’s USDT, with an estimated value of $3.2 billion. Such findings corroborate previous descriptions by Binance that the crypto exchange cold wallets have the bulk of its funds.
It remained uncertain if Binance seeks to utilize the funds to settle the penalty imposed by the Justice Department. The alternative of the crypto exchange’s plans to redeem the USDT for fiat currency is also viable.
Most circulating USDT tokens, estimated at 88.3 billion, are on the Tron blockchain as TRC-20 tokens. Despite its checkered and controversial history, holding the bulk of funds in cold wallets as USDT illustrates that Tether is a crucial player in the digital assets market.
Tether’s USDT Attracts Regulator’s Scrutiny for Illicit Financing
Stablecoins have emerged as speciality tokens that account for a significant stake in the trading volume. Often, traders utilize the stablecoins in entering and exiting trades without the necessity of involving fiat currency.
Tether commands a significant stake in the stablecoin sector, given that it ranks third largest in crypto by market capitalization per CoinGecko. The $88 billion worth of USDT tokens constitute 6% of the crypto market capitalization. It more than triples the second-ranked USDC Coin (USDC) estimated $24 billion in market capitalization.
The involvement of USDT in the $3.9 billion transfer by Binance shows another crypto project under the radar of US regulators for years. Two years ago, Tether settled $18 million in an investigation to prove it held $1 fiat to each stablecoin issued.
The investigation into the Tether’s reserves followed as detractors argued that it lacked the cash to back the minted billion-dollar token. Tether consistently dismisses such claims, labelling them as fear-mongering. Nevertheless, the stablecoin issuer has yet to offer a complete and independent audit of its reserves.
A recent disclosure saw Tether admit cooperating with the US authorities to freeze $225 million linked to human trafficking.
Binance Settlement Labeled Turning Point for Crypto Industry
In the meantime, market observers point out that the USDT transfer was completed before Binance and its former chief executive Changpeng Zhao confirmed settling a $1.8 billion fine. Also, the deal agreed upon involved forfeiting $2.5 billion, where $1.6 billion would pay resolutions Binance reached with other US regulators, including the Financial Crimes Enforcement Network (FinCEN), Office of Foreign Assets and Control (OFAC), and Commodity Futures Trading Commission (CFTC).
The settlement announced by DoJ features Zhao’s guilty plea, $50 million fine and resignation from the helm of Binance. While Zhao is due for sentencing on February 23, the regulator objected to his movement outside the US following his release on $175 million bail. The regulator argued that Zhao is a flight risk for the court to allow his return to Dubai till a fortnight prior to his sentencing.
The Binance settlement with the DoJ closed the year-long investigation on alleged regulatory noncompliance and money laundering charges. The resolution has become a turning point for Binance and the entire crypto industry.
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