Tether, a cryptocurrency stablecoin pegged to the US dollar and registered in the British Virgin Islands, has increasingly become a focal point in global money laundering investigations. Despite its widespread use as a purportedly stable digital currency, Tether’s operational practices have drawn severe criticism for facilitating illicit financial flows. Investigations and regulatory findings reveal that Tether has historically failed to fully back its tokens with fiat reserves and has commingled these reserves with Bitfinex’s operational funds, creating significant opacity. The anonymity afforded by its offshore British Virgin Islands registration, combined with its widespread use on blockchains like Tron, has made Tether a preferred vehicle for laundering billions in illicit proceeds globally, including funds linked to human trafficking, fraud, and cybercrime. While Tether has taken some steps towards compliance and cooperation with law enforcement, lapses such as delayed fund freezing and unregulated third-party involvement underscore persistent vulnerabilities exploited by criminal networks, especially notable within the British Virgin Islands’ lax regulatory milieu. This case highlights critical gaps in cryptocurrency oversight and exposes Tether’s dual role as both a legitimate financial tool and a conduit for global money laundering.​
Tether, a cryptocurrency stablecoin issuer incorporated in the British Virgin Islands, has been at the center of global money laundering controversies due to its USDT token’s widespread illicit use. The company’s structural practices, including partial backing of reserves, commingling funds with the Bitfinex exchange, and reliance on unregulated third-party entities, have facilitated the laundering of billions globally. Offshore registration in the British Virgin Islands has provided Tether with regulatory advantages, allowing opacity that criminals exploit for hiding and transferring illicit proceeds via digital assets. Despite enforcement actions, millions of dollars linked to terrorism and organized crime continue to flow through Tether’s network, underscoring ongoing AML challenges. The case exemplifies the complex intersection of cryptocurrency, offshore regulation, and global illicit finance, revealing gaps in oversight particularly pronounced in the British Virgin Islands jurisdiction and impacting global AML frameworks.​
