The Ukraine government’s pleas for stablecoin transactions to be stopped has been met with deaf ears from Tether.
On Friday, Ukraine Vice Prime Minister, Mykhailo Fedorov tweeted at Bitfinex and Tether CTO, Paolo Ardoino, calling for both to stop transacting with Russians.
“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,” the tweet read.
This comes amidst pleas sent to Western companies like Apple, Intel, SAP SE, and cryptocurrency exchanges to block Russian access to their goods and services. In response, Apple stopped selling iPhones, iPads, and Macs in Russia from March 1, 2022,
“We are stopping business in Russia and Belarus aligned with sanctions and, in addition, pausing all sales of SAP services and products in Russia and Belarus,” SAP SE stated on its website.
American chip giant Intel Corporation also shared to its website that it would also be “suspending all shipments to customers in both Russia and Belarus.”
While Tether did not respond directly to Fedorov’s tweet, it did say that “[it] conducts constant market monitoring to ensure that there are no irregular movements or measures that might be in contravention of international sanctions.”
Tether joins Kraken and Coinbase
Tether joins a list of crypto companies that refuse to block all Russians from accessing their services. Coinbase and Kraken have said that they will not block all Russian users since such action goes against crypto’s censorship-resistance rationale.
Fedorov has also requested American printing giant Xerox to stop supplying its equipment to Ukraine and petitioned software and cloud-computing giant Microsoft to “do more” to stop the war. He believes that public shaming is effective because companies are logical and rational in decision-making.
“I think this choice is as black and white as it ever gets. It is time to take a side, either to take the side of peace or to take the side of terror and murder,” Fedorov said in a recent interview with The New York Times.
However, civil society groups, such as the Internet Protection Society in Russia offer a different perspective:
“Shutdowns can be used in tyranny, not in democracy. Any sanctions that disrupt access of Russian people to information only strengthen Putin’s regime,” they said in a statement released earlier this week.
Tether can be used for capital flight
In targeting the stablecoin, Fedorov could be hinting at the potential for Tether to be used by the Russian elite for capital flight. In other words, moving money across borders.
A 2020 Chainalysis report revealed that China and other Southeastern Asian investors had transferred $50 billion to other jurisdictions using Tether.
However, some of these capital outflows were due to mining activity occurring in the country at the time. Nevertheless, Russians could potentially move their money outside the country and dump it into other cryptocurrencies. Researcher CryptoCompare estimates that bitcoin inflows from the Russian ruble have gone up 0.08% since the end of 2021.
Analytics firm Kaiko also suggests that the use of Tether is driving trading volume in rubles.
Tether is a private company that issues an eponymous stablecoin claimed to be backed by reserves of dollars. The New York Attorney General filed a civil lawsuit against Tether many years ago for lying about its fiat currency reserves, and for mixing corporate and customer funds. Tether subsequently settled the lawsuit, without admitting or denying any wrongdoing.
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