Welcome to the Forward Guidance newsletter, brought to you by Casey Wagner and Ben Strack. Here’s what you’ll find in today’s edition:

• Casey unpacks the alleged investigation into Tether. 

• A CEO’s final plea to Trump, Harris a week before the election. 

• As heavy bitcoin ETF inflows continue, BTC approaches its all-time high.

Tether denies it is being investigated by US government 

Rumors have circulated that stablecoin issuer Tether may be the subject of a federal investigation. 

If true, and if Tether is, to some extent, cooperating, my question lately has been: What does Tether have to offer the US government? We know deals only work if one side has something the other wants. 

Quick note: I know there are a lot of “ifs,” but bear with me.

With Binance, which settled with the DOJ almost a year ago, we know the exchange had some leverage: massive amounts of data. (Who is using Binance, where the money is going, etc.) When we’re talking about illicit actors, this is a powerful bargaining chip. 

Now, the Wall Street Journal is alleging that the US government is investigating Tether. In an article published last week, citing unnamed sources, the Journal reported that federal investigators in Manhattan are looking into alleged anti-money laundering violations and whether illicit actors have used the stablecoin to fund illegal activities. 

If WSJ is right, I guess there’s the answer to my question: Tether could have data that would be of interest to investigators. Of course, it’s also very possible there is no settlement on the table at all. If you'll remember, the SEC was notably absent from the list of agencies that settled with Binance.  

Hypotheticals aside, it’s important to note that Tether categorically denies the allegations and the existence of an investigation. 

“It is wildly irresponsible for WSJ to write articles with reckless allegations with such certainty when no authorities have gone on the record to confirm these rumors, and no sources are named,” a Tether spokesperson said in a Friday statement. “These stories are based on pure rank speculation despite Tether confirming that it has no knowledge of any such investigations into the company.”

Tether CEO Paolo Ardoino over the weekend assured the public that Tether’s reserves for USDT are safe and plentiful. He said the company has around $100 billion in US Treasurys and 82,000 BTC — plus 48 tons of gold.  

To be clear, the WSJ article makes no allegations that Tether has lied about or violated any laws regarding its reserve assets. The company in 2021 settled with the CFTC for $42.5 million over its “claims that USDT was fully backed by US dollars.” 

Ardoino added that Tether has historically worked with law enforcement agencies to combat fraud. He said the company has “voluntarily blocked” almost 2,000 wallets associated with suspected illegal activity. 

Tether last month brought in PayPal veteran Jesse Spiro to lead its government affairs team. 

“Jesse will be responsible for leading policy and engagement efforts with lawmakers, regulators and key stakeholders,” Tether wrote in its announcement. 

Sounds like he might be very busy.

— Casey Wagner

The Japanese yen was trading around 153.4 yen to the US dollar Tuesday afternoon in New York, hitting a three-month low and extending a weakness that has persisted through Japan’s general election this week. 

Analysts say the upcoming interest rate decision from the Bank of Japan, due on Thursday, will likely also impact the trading pair’s future moves.

A week out from the US election, the CEO of blockchain infrastructure firm Paxos is imploring the next presidential administration to be better than the last (when it comes to crypto).  

Charles Cascarilla’s open letter to Donald Trump and Kamala Harris doesn’t say much that hasn’t been said before. 

But perhaps the letter hits a little different as voters — millions of which own crypto — get set to cast their ballots next week. And, just days ago, Stripe’s $1.1 billion acquisition of Bridge sends a signal that non-crypto companies recognize the compelling benefits of stablecoin-based payments.

Cascarilla’s letter addresses familiar key points: While the US is an “inhospitable” place for financial innovation, the EU, UAE and others have capitalized on those “missteps” via regimes “that support safe innovation.” 

The “regulatory overreach, questionable banking policies and onerous and needless legal actions” in the US have resulted in “enormous costs in wasted time and money,” Cascarilla adds. 

To that point, Consensys on Tuesday revealed cuts impacting 20% of its workforce.

“Multiple cases with the SEC, including ours, represent meaningful jobs and productive investment lost due to the SEC's abuse of power and Congress's inability to rectify the problem,” Consensys CEO Joe Lubin wrote. “Such attacks from the US government will end up costing many companies that have been investigated, sued or sent Wells Notices, many millions of dollars.”

While Trump has said he would fire SEC Chair Gary Gensler, Harris has not made any such statement. Blockchain Association’s Ron Hammond previously told me the industry is waiting for more clarity on that from the VP. 

In the meantime, digital dollars will continue to move offshore until there is a stablecoin framework that drives innovation, Cascarilla wrote.

The positive note from the Paxos CEO: “Thankfully, there is bipartisan interest in fixing this broken status quo.”

Hammond said earlier this month he believed the chance of a stablecoin bill getting passed by the end of 2024 was 30%. That’s not exactly great. But at least it’s higher than the Yankees’ World Series title odds at this point.

— Ben Strack

Bitcoin’s price had risen above $72,900 by 1:30 pm ET on Tuesday. It dipped slightly to about $72,750 by 2 pm ET — up 4% from 24 hours ago. 

This surge to just below BTC’s record high (above $73,700, set in March) comes as capital continues to pour into US spot bitcoin ETFs. Another $479 million of net new money entered that category on Monday, Farside Investors data shows.

Those funds have seen $22.5 billion worth of net inflows since launching in January — with nearly $3.9 billion, or 17%, of those gains coming since Oct. 11. 

“I think that is people recognizing that the train may leave the station sometime around the election,” Bitwise CIO Matt Hougan said during an X space late last week. 

Hougan’s firm — a crypto-focused asset manager that offers both a BTC and ETH ETF — regularly meets with institutions about possible crypto allocations. The number of meetings that have led to such an allocation have gone up “significantly” in recent weeks, he explained.

A portion of these institutional players have embraced what he called “crypto sleeves,” Hougan added during the X space — exposure not just to a bitcoin fund, but perhaps an allocation to another that holds ETH and additional exposure to MicroStrategy or bitcoin miners.

“[It’s] the idea of treating crypto the same way you treat stocks, which is you don’t just buy Nvidia; you buy a basket,” he said.

Beyond institutional buy-in, bitcoin investors are betting on governments continuing to debase fiat currencies, Hougan noted in a CIO memo. But, he argues, BTC does not need the dollar to collapse to hit $200,000, adding: “It can get there just by capturing a sliver of gold’s existing market.”

Thoughts differ on the trajectory of crypto prices from here in the case of a Trump or Harris victory. But perhaps we won’t have to wait for the election to wrap up before seeing BTC notch a new all-time high.

— Ben Strack

• We noted bitcoin’s surge, which had the asset at 1.3% below its record-high price set in March. Ether was up 3.6% from 24 hours ago, as of 2 pm ET, to roughly $2,650. But unlike BTC, ETH remains significantly further from its all-time high — about 45% off the nearly $4,900 price it was trading at in November 2021.

• Sick of presidential election polls yet? Well here’s one more: A CNN poll shows VP Kamala Harris up a point on Donald Trump (among likely voters) in Arizona, while the former president leads Harris by a point in Nevada. In case you missed Ben’s Q&A with Coinbase chief policy officer Faryar Shirzad earlier this month about Trump and Harris, check it out here. 

• The technology-focused ETF that T. Rowe Price launched last week holds Coinbase. Ben chatted with portfolio manager Dominic Rizzo about his thoughts on COIN and the crypto/blockchain space more broadly. Stay tuned for that this week in the newsletter and on Blockworks.co.