Tether looks to The Bahamas for dollar transfer processing as US banks sever crypto ties

Tether (USDT), the famous stablecoin issuer, has integrated with a privately owned bank based out of the Bahamas for its dollar transfer processing. It comes as banks in the US continue to sever ties with crypto due to heightened scrutiny by regulatory bodies. The clampdown has compelled several firms to shift their businesses to other jurisdictions with better offerings.

Also Read: SEC resorts to rare tactic, files secret motion against Binance

Tether looks to the Bahamas for USD transaction processing

A Bloomberg report has revealed Tether’s new ties with Bahamian Britannia Bank and Trust. The integration is meant to help the stablecoin issuer in processing its dollar transfers.

Stablecoins are one of the most useful classes of tokens in the crypto realm, providing a means for traders to move their digital assets from one exchange to the other. They are pegged on a 1:1 ratio to the USD.

It is worth noting that USDT is the most popular stablecoin, with the majority of crypto traders and enthusiasts using it to leverage their crypto-related trades. FXStreet has reached out to Tether for full details of the integration, pending feedback.

Meanwhile, the fact that Tether remains rather vague about its banking association remains a concerning subject, as there is no clarity to how the firm accesses and stores the $86 billion of assets it uses to back the Dollar.

Experts have raised concerns over Tether not being clear about its banking relationships. For some, the lack of transparency is a major barrier. As Patrick Tan, general counsel for blockchain data analytics firm ChainArgos, puts it:

It [the secrecy] continues to be a major impediment for developing the cryptocurrency industry, deterring regulatory approvals on other matters, and discouraging traditional asset managers with little tolerance for regulatory risk from more active participation in the space.

Nevertheless, crypto firms continue to look away to jurisdictions with better business environments for their offerings. The move comes as they avoid regulatory scrutiny that has intensified this year.

The alleviation of the regulatory microscope is not limited to crypto firms, as financial institutions like banks have also succumbed to the pressure.  

Banks severing ties with crypto

Banking or money lending institutions in the US have shown clear intention to separate from crypto-related firms, repelled by intense scrutiny from regulatory bodies across the country. The crackdown has some thinking of crypto firms in the US facing the risk of becoming unbanked for the most part.

US lenders have demonstrated reluctance to serve crypto firms, a decision attributed to the collapse of Sam Bankman-Fried’s cryptocurrency empire, FTX. The implosion broke a pattern of banks embracing crypto firms, including the oldest bank in the US, BNY Mellon, and American banking giant State Street.

After FTX, banking regulators began warning banks about links to the crypto industry. This saw lending institutions such as New York’s Metropolitan Commercial Bank and Signature Bank begin severing relationships with crypto customers including Binance Exchange. 

In the aftermath, the actions constrained crypto firms’ access to payment onramps and offramps requisite for business operations. Market observers have faulted unfavorable regulations in the US for threatening to dampen America’s role in the emerging industry.