Daily News 19

Tag: JPMorgan Chase

  • Tether Confirms Minimal EQIBank Exposure After $89M US Asset Seizure

    Tether Confirms Minimal EQIBank Exposure After $89M US Asset Seizure

    Key Highlights

    • Tether confirms exposure to EQIBank is less than 0.034% of total group assets, approximately $64 million based on its June 2024 attestation of $187.75 billion.
    • U.S. authorities seized funds from Capstone, a payment processor used by EQIBank to move customer money through Wells Fargo and JPMorgan Chase accounts, alleging misrepresentation of business activities.
    • Tether states it had no knowledge of the alleged conduct by Capstone cited in the Department of Justice civil forfeiture case.

    Tether Limits EQIBank Exposure Amid U.S. Asset Seizure

    Stablecoin issuer Tether has moved to reassure markets regarding its exposure to EQIBank, a Dominica-licensed lender caught in a U.S. law enforcement action. According to a company spokesperson, assets held at EQIBank represent less than 0.034% of Tether’s total group assets. Based on the firm’s June 2024 attestation reporting $187.75 billion in consolidated assets, that percentage translates to roughly $64 million at risk. The disclosure comes after reports by the Financial Times and The Information detailed a U.S. asset seizure that could potentially force EQIBank into liquidation.

    Capstone Payment Processor at Center of Civil Forfeiture Case

    The regulatory action centers on Capstone, a U.S.-based payment processor that EQIBank utilized to hold funds and facilitate customer money movements through correspondent banking accounts at Wells Fargo and JPMorgan Chase. Court filings indicate that U.S. prosecutors seized funds from those Capstone accounts and filed a civil forfeiture complaint. The Department of Justice alleges that Capstone misrepresented the nature of its business to the banking institutions involved, a characterization that triggered the enforcement action and the subsequent freezing of assets flowing through the processor’s channels.

    Tether Denies Prior Knowledge of Alleged Misconduct

    In a statement provided to CoinDesk, a Tether spokesperson explicitly distanced the company from the allegations facing Capstone. “Tether had no knowledge of the conduct by Capstone alleged by the Department of Justice,” the spokesperson said via email. The company further clarified that its assets held at EQIBank were limited to “less than 0.034% of the assets of the group,” though it declined to specify the exact dollar figure. The response underscores Tether’s effort to contain reputational fallout as the stablecoin giant navigates heightened scrutiny over its reserve composition and banking partnerships.

    Why This Matters

    The episode highlights the persistent counterparty and banking-layer risks inherent in the stablecoin ecosystem, even for the largest issuer by market capitalization. Tether’s reserve attestations have historically shown a mix of cash, Treasury bills, and other assets held across a network of global financial institutions. The EQIBank situation illustrates how enforcement actions against second- or third-tier payment processors—entities often invisible to end users—can create sudden liquidity constraints for custodial partners. For the broader digital asset industry, the case reinforces regulatory focus on the “on-ramp/off-ramp” infrastructure connecting crypto markets to the traditional financial system, particularly regarding anti-money laundering compliance and know-your-customer obligations at the payment processor level. Market participants will likely monitor whether other stablecoin issuers disclose similar exposures and how EQIBank’s potential liquidation proceedings unfold in the coming weeks.

    Frequently Asked Questions

    How much money does Tether have at risk in EQIBank?
    Based on Tether’s June 2024 group asset figure of $187.75 billion and the disclosed exposure limit of less than 0.034%, the at-risk amount is approximately $64 million. Tether has not provided an exact dollar amount.
    What triggered the U.S. seizure of funds connected to EQIBank?
    The U.S. Department of Justice seized funds from accounts held by Capstone, a payment processor used by EQIBank, at Wells Fargo and JPMorgan Chase. Prosecutors filed a civil forfeiture case alleging Capstone misrepresented its business activities to those banks.
    Did Tether know about Capstone’s alleged misconduct?
    No. A Tether spokesperson stated explicitly: “Tether had no knowledge of the conduct by Capstone alleged by the Department of Justice.”
  • Visa Tightens Memecoin Card Rules After Digital-Media Classification

    Visa Tightens Memecoin Card Rules After Digital-Media Classification

    Key Highlights

    • Visa is directing payment processors to stop using merchant category code 5815 (digital media) for memecoin purchases and instead apply cryptocurrency-related classifications.
    • JPMorgan Chase flagged at least one Visa transaction for incorrect coding, and the New York Attorney General’s Office is reviewing the issue.
    • The reclassification does not prohibit card-based memecoin purchases but may affect how card rewards are applied to such transactions.

    Visa Cracks Down on Memecoin Transaction Coding

    Visa is moving to tighten how memecoin purchases are classified across its network after scrutiny revealed that some card transactions were being processed under a digital-media merchant category code typically reserved for goods such as movies and audiobooks. The change follows test purchases made through Robinhood Wallet and Fomo using Visa and Mastercard cards via Apple Pay and Google Pay, which were processed by Crossmint and received merchant category code 5815. That code covers digital goods, whereas cryptocurrency purchases traditionally fall under separate merchant codes that determine how card issuers handle transactions, including rewards eligibility and risk controls.

    Issuer and Regulatory Scrutiny Prompts Action

    The misclassification drew immediate pushback from major financial institutions and regulators. JPMorgan Chase challenged the coding of at least one Visa transaction, stating it carried the wrong merchant category code and confirming it had opened a case with Visa. Simultaneously, the New York Attorney General’s Office said it was reviewing the issue. In response, Visa has reportedly instructed payment processors, including Checkout.com, to cease using the digital-media category for memecoin purchases and has given them until next week to update their systems to reflect cryptocurrency-related classifications.

    SEC Guidance Does Not Govern Card Network Rules

    Crossmint had cited a 2025 U.S. Securities and Exchange Commission staff statement on memecoins in connection with the transactions. However, that guidance pertains to securities law classification and does not determine how card networks categorize transactions for processing, rewards, or compliance purposes. Visa’s directive addresses the payment-network layer specifically, ensuring that memecoin purchases are routed through the appropriate merchant codes used for other cryptocurrency transactions.

    Why This Matters

    The reclassification carries practical consequences for consumers and the broader crypto payments ecosystem. Merchant category codes influence whether a transaction qualifies for standard credit card rewards—such as cash back on digital media—or is excluded, as many issuers treat cryptocurrency purchases differently. By aligning memecoin coding with established cryptocurrency categories, Visa closes a loophole that could have allowed purchasers to earn rewards unintended for digital-asset acquisitions. The move also signals that card networks and issuers are actively monitoring the intersection of consumer payments and emerging token types, especially as wallets like Robinhood Wallet and apps like Fomo expand access to memecoins through familiar checkout rails like Apple Pay and Google Pay. Regulatory attention from the New York Attorney General underscores that compliance scrutiny extends beyond securities law into consumer-protection and payment-network integrity.

    Frequently Asked Questions

    Does Visa’s change ban buying memecoins with a credit or debit card?

    No. Visa’s directive does not prohibit card-based memecoin purchases. It requires that such transactions be classified under cryptocurrency-related merchant category codes rather than the digital-media code (5815).

    Will this affect credit card rewards on memecoin purchases?

    Potentially, yes. Many card issuers exclude cryptocurrency-coded transactions from standard rewards programs. Shifting memecoin purchases to crypto merchant codes may cause them to lose eligibility for cash back, points, or miles that might have applied under the digital-media classification.

    What role did the SEC’s 2025 memecoin statement play in this decision?

    The SEC staff statement addresses whether certain memecoins qualify as securities under federal law. It does not govern payment-network merchant category codes. Visa’s action is independent and focused on transaction processing classification, not securities regulation.