Ukraine Fears Stablecoin Being Used for Capital Flight, Asks Tether to Stop Transactions to Russians

Ukraine's government has been ramping up pressure on crypto businesses and services to cease operations in Russia.

By Shomik Sen Bhattacharjee | Updated: 14 March 2022 15:07 IST

Ukraine Fears Stablecoin Being Used for Capital Flight, Asks Tether to Stop Transactions to Russians

Photo Credit: Unsplash/ Drawkit Illustrations

Tether has been widely used as a global tool for capital flight in the past

Highlights

Tether is a private company that issues a stablecoin of the same name
Tether has taken a stance similar to Kraken, Coinbase
Ukraine could be fearing capital flight using stablecoins

Ukraine's minister of digital transformation, Mykhailo Fedorov, has urged Tether to stop doing business with Russian citizens in a Twitter post aimed at the stablecoin operator's high-profile CTO, Paolo Ardoino. This comes amidst pleas sent to companies like Apple, Intel, SAP SE, and cryptocurrency exchanges to block Russian access to their goods and services. Tether, in response, has decided to decline the request, similar to a host of popular crypto exchanges like Kraken and Coinbase who've previously cited censorship as one of the problems that cryptocurrencies stand against.

While Tether's response did not arrive as a direct response to the Ukrainian minister's tweet, in a statement to CoinDesk the stablecoin issue said, "Tether conducts constant market monitoring to ensure that there are no irregular movements or measures that might be in contravention of international sanctions."

Today, the entire democratic world has united against Russia to punish the bloody invaders economically. I call on @tether_to @paoloardoino to stop any transactions with the Russians! For peace!
— Mykhailo Fedorov (@FedorovMykhailo) March 11, 2022

Since Russia's invasion last month, Ukraine's government has been ramping up pressure on businesses to cease operations in Russia. Companies from PayPal to Goldman Sachs have taken steps to quit the country, although the response from most crypto-related companies has been more reserved.

As highlighted by a Bloomberg report, Fedorov's tweet specifically mentioning Tether could have been hinting at the potential for USDT to be used by the Russian oligarchs for moving money across borders. Tether has been widely used as a global tool for capital flight in the past, the report states, eventually being used to convert into other cryptocurrencies, like Bitcoin. Citing numbers provided by data-analytics firm Kaiko, the report also shows that a massive chunk of Ruble-denominated crypto trading volume appears to be conducted using Tether.

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For the uninitiated, Tether is a private company that issues a stablecoin claimed to be backed by reserves of US dollars. Back in April 2019, the New York Attorney General had filed a civil lawsuit against Tether for apparently lying about its fiat currency reserves, and for mixing corporate and customer funds. Tether subsequently settled the lawsuit in February 2021, without admitting or denying any wrongdoing.

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