Blockchain analytics firm Chainalysis will provide Tether with a new suite of tools to monitor activity around its USDT stablecoin on secondary markets. The capabilities will allow Tether to identify wallets potentially tied to sanctioned entities, illicit activities, and provide broader market insights.

Four Key Monitoring Solutions Tether outlined four main solutions Chainalysis will provide:

Sanctions Monitoring - Identifying addresses/transactions linked to sanctioned individuals/entities
Illicit Transfer Detector - Flagging transactions potentially associated with crimes like terrorist financing
Categorization - Classifying USDT holders by type (exchange, darknet market, etc.)
Largest Wallet Analysis - Tracking activity of major USDT holders

The tools aim to enhance transparency around USDT's usage while safeguarding Tether's ecosystem from illicit finance risks.

Addressing Regulatory Scrutiny The partnership comes as Tether has faced criticism from regulators and watchdog groups about USDT allegedly being used to facilitate criminal activities and sanctions evasion.

In October, a U.S. Senator alleged Tether "knowingly" violated sanctions by being involved in funding Hamas militant attacks. The UN has also highlighted USDT's perceived role in organized crime finance across Asia.

By working with Chainalysis, Tether likely hopes to demonstrate its commitment to actively monitoring and preventing such misuse of its massively circulating $110 billion stablecoin.

Focus on Transparency Tether's CEO stated the Chainalysis collaboration "reinforces our proactive approach to safeguarding our ecosystem against illicit activities."

The stablecoin issuer has also faced scrutiny around its lack of financial transparency and reserves backing USDT. Monitoring secondary USDT flows could provide more visibility.

While Tether claims to have partnered with authorities across 43 jurisdictions, the Chainalysis tools represent another step to publicly bolster its compliance capabilities amid sustained regulatory spotlight on the leading stablecoin.