The market capitalization of Tether (USDT) tokens has increased by nearly $2 billion since the US Treasury Department imposed sanctions on cryptocurrency mixer Tornado Cash.
The Office of Foreign Assets Control essentially banned Americans from using Tornado Cash on August 8, blacklisting 44 USD Coin (USDC) and Ether (ETH) addresses connected to the service on a Specially Designated Nationals list. and Blocked Persons (SDN).
OFAC alleges that Tornado Cash was used by individuals and criminal organizations to launder more than $7 billion in cryptocurrency since 2019. Funds linked to North Korean hackers from the Lazarus Group are also believed to have been commingled through Tornado Cash.
Circle, the issuer of the stablecoin USDC, went so far as to freeze the assets linked to the 44 addresses indicated by OFAC. Circle’s move was justified given the potential ramifications of continuing to interact with addresses.
Penalties for noncompliance range from $50,000 to $10,000,000 in fines and 10 to 30 years in prison. Circle froze 75,000 USDC of funds linked to the accounts in question in an effort to fully comply with the Treasury decision.
Curiously, USDC’s market capitalization has declined by about $2 billion, from highs of about $55 billion in the past month to its current cap of about $53 billion. Several cryptocurrency market participants have watched the decline of USDC on social media, and a correlation has been drawn between the decline in the market capitalization of USDC and the increase in the capitalization of USDT.
One user on Twitter suggested that users transferred around $1.6 billion USDC to USDT following the Tornado Cash sanctions:
Investors transferred over $1.6 billion from #USDC to #USDT after Tornado Cash was blocked pic.twitter.com/nQ9y6xHXi8
— The London Crypto™️ (@TheLondonCrypto) August 16, 2022
Investors transferred over $1.6B from #USDC to #USDT after Tornado Cash crashed
Paolo Ardoino, CTO of Tether and cryptocurrency exchange Bitfinex, also mocked the USDC-USDT “swap” on Twitter. Both USDC and USDT have the ability to freeze funds through Ethereum’s smart contract functionality, but the former was the only issuer to announce an asset freeze on blacklisted addresses.
Why no one is talking about it? pic.twitter.com/SEAChZZeLO
– Paolo Ardoino (@paoloardoino) August 14, 2022
Cointelegraph has contacted Tether to find out if it intends or is expected to freeze USDT in the hands of blacklisted addresses linked to Tornado Cash.
Both Circle and Tether have also assured the broader cryptocurrency community that both stablecoin platforms will support Ethereum’s upcoming “merger” with its proof-of-stake Beacon Chain, which is expected to take place in September.
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