Stablecoin Tether snubs Ukraine on Russia ban?

Tether, the crypto stablecoin that’s been under scrutiny from regulators, appears to be turning a blind eye to pleas by the Ukrainian government to stop all transactions with Russians.

Ukraine Vice Prime Minister Mykhailo Fedorov, in a Tweet sent Friday, asked Tether and its chief technology officer and public face, Paolo Ardoino, to stop all transactions with Russians. Fedorov had previously issued such pleas to a slew of Western companies, ranging from software giant SAP SE to chipmaker Intel Corp. At the beginning of the war, Fedorov also asked all major crypto exchanges to stop supporting Russian users. His latest appeal appears to be the first directed at a specific cryptocurrency provider.

Tether responded indirectly to Fedorov’s request.

“Tether conducts constant market monitoring to ensure that there are no irregular movements or measures that might be in contravention of international sanctions,” the British Virgin Islands-based company said in a statement.

Tether isn’t the only crypto company to decline to stop doing business with all Russians. Most major crypto exchanges, including Coinbase Global Inc. and Kraken, have said that while they’ll abide by sanctions imposed on Russian oligarchs, cutting off Russian users goes against the spirit of what crypto -- supposed to be free of government interference -- is all about.

Tether has long been used worldwide for capital flight, and may potentially be used by Russians to take money out of the country and eventually move that into other cryptocurrencies, like Bitcoin. Money flows into Bitcoin from rubles have increased to 0.10% recently, from 0.02% at the end of last year, according to researcher CryptoCompare. But the majority of ruble-denominated crypto trading volume appears to be conducted with Tether, according to data from analytics firm Kaiko.

Tether, whose reserves are supposed to be backed by fiat and other assets, is issued by a private company, whose operations are shrouded in mystery. It was sued by the New York Attorney General several years ago for co-mingling corporate and client funds and lying about its reserves; the company settled the suit without admitting or denying wrongdoing.