Tron’s Trajectory and Tether’s Future in Light of Legal Challenges
Recent legal challenges have had a significant impact on Tron’s trajectory and raise questions about Tether’s future. A study by TRM Labs revealed that in 2023, Tron (TRX), under the leadership of Chinese entrepreneur Justin Sun, accounted for 45% of all illicit crypto transactions, an increase from 41% the previous year. Ethereum (ETH) followed at 24%, with Bitcoin (BTC) at 18%.
The research also highlighted a concerning trend of blockchain addresses associated with terrorist financing activities on Tron increasing by 125%, particularly those receiving Tether (USDT). Tether remains the top choice for criminal activities, with over $19 billion in illicit funds, surpassing stablecoins like USD Coin (USDC).
Tron’s appeal lies in its low fees and quick transactions, making it an attractive platform for illegal activities and money laundering. The platform has become a preferred choice for hackers, including those linked to North Korea, who often exchange stolen funds for USDT on the network. These funds are then laundered and converted into fiat currency through high-volume over-the-counter brokers.
Despite these alarming statistics, TRM Labs reported a decrease in hacked and sanctions-exposed fund volumes, potentially due to increased pressure from governments and law enforcement agencies globally.
However, Justin Sun and the Tron Foundation have not been immune to legal scrutiny. They faced charges from the U.S. Securities and Exchange Commission (SEC) for unregistered offerings and market manipulation.
In March 2024, Tron (TRX) faced further legal troubles as the SEC filed a lawsuit in New York’s Southern District, implicating Sun, the Tron Foundation, and the BitTorrent Foundation for alleged securities violations related to TRX and BitTorrent (BTT) tokens. The SEC accused them of promoting these tokens without proper registration, violating federal securities laws, and misleading investors. The involvement of high-profile celebrities in endorsing TRX and BTT added complexity to the situation.
Moreover, concerns about USDT’s role in facilitating illicit activities, particularly in Southeast Asia, have also surfaced. A United Nations report in January 2024 highlighted the misuse of USDT in money laundering and scams, notably through online gambling platforms in the region.
In response to these concerns, Sun addressed the issues in a post on Jan. 19, disputing some details related to USDT transactions on Tron’s TRC-20 protocol. He emphasized Tron’s commitment to combating blockchain misuse while also pointing out inaccuracies in the UN’s findings. Tether also defended its role, mentioning contributions to law enforcement efforts.
Circle, the issuer of stablecoin USD Coin, announced its decision to discontinue support for USDC on the Tron blockchain in February 2024. This move was part of a phased transition to uphold USDC’s reputation for trustworthiness and regulatory compliance. Binance also announced that it would no longer facilitate deposits and withdrawals of USDC via the Tron network.
Looking ahead, Tron is refuting the SEC’s claims and using legal arguments to challenge the lawsuit. Tether is also facing tough regulations, especially in the EU, with voices within the cryptocurrency industry calling for legal action against the stablecoin issuer. Tether has completed the SOC2 audit to ensure compliance with security standards, emphasizing the importance of regulatory compliance and security measures moving forward.