The Wall Street Journal recently wrote about a giant, unregulated digital currency that is undermining the U.S. government’s fight against arms dealers, sanctions busters and scammers. Last year, nearly as much money moved through its network as through Visa cards. It recently generated more profits than BlackRock but has a fraction of the number of employees. Its name is Tether.
The cryptocurrency has grown into an important cog in the global financial system, with $190 billion in daily transactions. In essence, Tether is a digital dollar - albeit one privately controlled in the British Virgin Islands by a mysterious group of owners whose activities are largely unknown to the government.
Tether is known as a stablecoin because it is pegged 1:1 to the U.S. dollar and was used earlier among cryptocurrency enthusiasts. But it has penetrated deep into the financial underworld and become a parallel economy beyond the reach of U.S. law enforcement. In places where the U.S. government has restricted access to the U.S. dollar financial system—Iran, Venezuela, Russia—Ethereum is thriving as a stealth dollar for moving funds across borders. Russian oligarchs and arms dealers use Taylor to purchase property abroad and pay suppliers for sanctioned goods. Venezuela’s sanctioned state oil company pays for goods in Taylors. Drug cartels, racketeering syndicates and terrorist groups such as Hamas use it to launder money.
Yet Tether is also a lifesaver for people in dysfunctional economies like Argentina and Turkey plagued by hyperinflation and hard currency shortages, who use it to pay for daily expenses and protect their savings. Tether is arguably the first successful real-world product to emerge from the cryptocurrency revolution that began over a decade ago. It makes its owner incredibly wealthy. Tether has $120 billion in assets, primarily risk-free U.S. Treasury bills, as well as Bitcoin and gold positions. Last year, it generated $6.2 billion in profits, $700 million more than BlackRock, the world's largest asset manager.
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