Tether and Tron establish their own blockchain intelligence agency.

The Stablecoin Provider Tether Becomes the Most Profitable Company Per Capita Ever. Together with TRON and TRM Labs, It Now Establishes the „T3 Financial Crime Unit“ to More Effectively Prevent Criminals from Using Tether (USDT).

TRON, Tether, and TRM Labs announce that they have jointly established the „T3 Financial Crime Unit“ (T3 FCU). The T3 FCU will work closely with law enforcement to prevent the stablecoin USDT from being used by criminals on the Tron blockchain.

This partnership combines the expertise of three players: TRM is a U.S.-based blockchain analyst specializing in identifying criminal transactions; Tether already has its own analytics team, and TRON develops the Tron blockchain, on which most Tether transactions occur.

The recently released press statement does not disclose the exact founding date of T3. However, it explains that T3 „froze more than 12 million USDT in collaboration with law enforcement just a few weeks after its inception,“ which were linked to extortion, investment fraud, and other criminal activities.

Blacklist After Blacklist

The Tether Dollar USDT is the leading currency in the crypto market with a market capitalization of nearly $120 billion, more than half of which circulates on the Tron blockchain. This is also utilized by fraudsters, terror financiers, and other criminal actors, as stated somewhat euphemistically in the press release.

With T3, Tether and Tron aim to counter this with the help of TRM Labs. Thanks to the smart contracts in the Tether token, they can combat crime using methods that are not available with other native cryptocurrencies like Bitcoin: They can freeze coins.

Tether has long made use of this capability. So far this September alone, the company has added more than 40 addresses to its blocklist. These typically hold amounts in the 6-7 digit range, sometimes 4-5 digits, with a peak of more than five million dollars. According to a Dashboard on Dune Analytics, Tether has already frozen nearly 1,800 addresses totaling 1.23 billion USDT. This pace has picked up since the fall of 2023.

With the new collaboration with TRM, Tether could freeze even more quickly in the future. TRM will assist in „identifying transactions connected to suspected illegal activities such as terrorism, sanctions evasion, theft, hacking, cybercrime, and fraud.“

The word „suspected“ can be either concerning or hopeful, depending on your perspective. State actors like police and prosecutors require more than a „suspected“ status to seize money; they need to obtain a court order first. However, private actors like Tether and Tron can freeze coins and tokens based merely on suspicion. This can make combating crime more effective, but it can also lead to the premature punishment of innocent people. It all depends on your viewpoint.

The Incognito Dollar

While Tether enjoys a shady reputation that instills trust among criminals, hardly any company in the crypto space takes such strong measures against crime. Tether even works closely with the Secret Service and the FBI.

However, Tether may also need this. The stablecoin has positioned itself so well as the pirate dollar that criminals around the world demand it faster than Tether can blacklist addresses.

According to the Wall Street Journal, Tether „has deeply spread into the financial underworld, creating a parallel economy that operates beyond the reach of U.S. law enforcement.“ Wherever the U.S. government restricts access to the dollar system – such as in Iran, Venezuela, or Russia – „Tether flourishes as a kind of incognito dollar,“ used to move money across borders.

Especially in Russia, Tether, explains the Wall Street Journal, is „a vital payment channel.“ The stablecoin is the „most popular way for importers to convert rubles into foreign currencies.“ Major banks like Rossbank, numerous elites, celebrities, and other actors are involved. According to the Journal, Tether is an almost essential channel for Russia to pay for imports, as the ruble is toxic in any balance sheet.

Simultaneously, the Wall Street Journal acknowledges, the stablecoin helps people in „dysfunctional economies“ like Argentina or Turkey to save their money.

Obscenely Profitable

Tether is, for better or worse, probably the most successful crypto project. At the same time, Tether is obscenely profitable. The company reported making more than six billion dollars in profit last year, even surpassing BlackRock, the world’s largest asset manager. And this with fewer than 100 employees! According to CEO Paolo Ardoino, Tether has the highest per capita profit of any company ever. Tether employees can expect an eight-figure annual bonus.

Most of Tether’s revenue is paid out by the U.S. Treasury. Tether has become the largest private-sector buyer of U.S. government bonds and earns handsomely from the high interest rates. Even if these rates fall, Tether will remain extremely profitable for a long time.

Tightly Intertwined with the U.S. Government

In any case, Tether and the U.S. Government are closely intertwined by nature. Through its investments in government bonds, Tether not only finances the U.S. government but also ensures that the dollar remains the most important currency even where sanctions are in place. Instead of a „de-dollarization“ as pursued by Russia and China, Tether is leading to a „hyper-dollarization“ – the dollar has never been stronger.

This tacit pact between the U.S. and Tether is not free of dirt, mud, and criticism. But it seems to be an excellent deal for both sides. If digital Tether replaces the classic dollar bill, the greenback, as the global underground payment method, the U.S. will have a much-improved grip to enforce sanctions and legal actions. The collaboration with T3 will further simplify this.

If one takes this further, one encounters ironically charged scenarios. Should Russia indeed use Tether extensively to circumvent sanctions, Tether would control vital trade routes of the country. The U.S. can wait until the bags are full and then instruct Tether to strike. Just a few operations in the smart contract would be enough to deal a fatal blow to the Russian economy – while the Russian sanctions evaders indirectly lend money to the U.S. government.