How to implement AML Risk Assessment on the most widely traded Stablecoin Tether?

According to Coinmarketcap, the Tether (USDT) recently became the most traded cryptocurrency. The 24-hour trading volume of the Tether (USDT) stablecoin broke records last week: almost 10 billion higher than Bitcoin and triple of Ethereum’s volume.

Source: 05-02-2020

This is not the first time that Tether beats bitcoin. Back in May 2018, the stablecoin recorded a peak of 31 billion dollars traded in 24 hours. In April 2019, Tether’s trading volume exceeded that of Bitcoin’s for the first time. On August 27th 2019, once again the stablecoin surpassed Bitcoin in terms of trading volume, a situation which occurs more and more often since, at about $21 billion per day, or 18% higher. 

Source: 05-02-2020

No doubt that Tether has become the most widely used stablecoin since it was traded for the first time around Feb 25th 2015. As Tether trading grows in popularity, the need to mitigate risk for investors is important. 

Why Tether is extensively traded?

Since last summer, Tether trading volume is exploding. Many reasons can explain the surge. The first thing to say it is because of the nature itself of the coin: created to avoid price fluctuation. Another simple reason is also that the most popular exchange platforms added new trading pairs for fiat against USDT and for some stablecoins against USDT as well. Some theories say Chineses traders are driving the market because they try to bypass barriers to access banking services by trading USDT, or because it’s easy for them to enter the cryptocurrency ecosystem since USDT can be easily exchanged for cash. Others claim that USDT trading is a way to manipulate the price of bitcoin

Anyway, Tether is widely traded, it is true. It brings up this essential question: how to assess the risk of Tether, the most popular stablecoin which plays a more and more important role in the cryptocurrency world?

How to assess Risk AML about USDT?

From a transaction monitoring point of view, Scorechain addresses the issue with the Ethereum & ERC20 Blockchain analytics. 

The platform provides the risk of Tether transactions. As an ERC20 token, Scorechain is able to provide AML scoring for each traded coin. For each transaction, it provides details about the origin and destination of funds of the transaction. The company combines behavioural analytics, importation of international watch lists, reporting features and realtime alerts notification system.

The software solution provides all the risk AML tools to implement the right internal controls procedures.

Compliance team can know from which exchange this specific USDT has been traded, where it went to before being withdrawn or traded again. All this information is associated with hundreds of risk indicators.

With a comprehensive and transparent risk assessment methodology, Scorechain rates exchange platforms, services companies and any other legal entity to determine the level of trust and provides accurate information to compliance team for the most adequate risk-based approach

Monitoring Tether transactions is a way for crypto players and financial institutions to enhance their internal controls in this complex environment. With daily and real-time monitoring on users profiles, dealing with counterparts trading USDT is no longer a cloudy business practice. 

That’s how Scorechain brings trust in crypto markets.

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About Scorechain:

Specialised in crypto-tracking compliance tools since 2015, the Luxembourgish company provides AML & Compliance solutions for cryptocurrencies. It serves customers worldwide, mainly cryptocurrencies companies, OTC trading desks, ICOs, private banks, audit firms, and custodians. Scorechain analytics include Bitcoin analytics with Lightning Network, Ethereum analytics with all ERC20, Litecoin, Bitcoin Cash and Dash. All products are available both on UI and API, with full customization and reporting features. With a powerful and unique scoring system, Scorechain’s products allow traditional finance players and cryptocurrency companies to apply a risk-based approach for this new class of assets and fulfil all new regulation requirements.

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