Executives at Tether International, the company that issues the digital currency tether
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are facing a federal criminal probe into whether they committed bank fraud, Bloomberg News reported Monday.

The investigation centers around whether “Tether concealed from banks that transactions were linked to crypto,” according to the report, which added that the conduct being investigated took place several years ago.

“Tether routinely has open dialogue with law enforcement agencies, including the DOJ, as part of our commitment to cooperation and transparency,” the company said in a statement to Bloomberg.

Tether is a so-called stablecoin pegged to the U.S. dollar, which is important to the broader market in cryptocurrencies, including bitcoin
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and ether
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because traders use the currency to park uninvested funds at crypto exchanges to shield them from the volatile prices of other crypto assets. More than half of all bitcoin trades are either into or out of tether, the report said.

Financial regulators have expressed serious concern over the use of stablecoins for both investor protection and financial stability reasons. An investigation into Tether by New York Attorney General Letitia James was instrumental in revealing that the currency is not backed one-to-one by U.S. dollars, but through a combination of riskier assets like corporate debt. In February, James banned the use of tether and an associated crypto exchange, Bitfinex, for making false statements about the currency’s backing.

Last week, Treasury Secretary Janet Yellen convened a meeting of the nation’s top regulators to discuss tether and other stablecoins. Following the meeting Yellen emphasized “the need to act quickly to ensure there is an appropriate U.S. regulatory framework in place,” according to the Treasury.

Securities and Exchange Commission Chairman Gary Gensler said earlier this month that regulators should apply rules to stablecoins that are similar to those that govern bank deposits and money market mutual funds.

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