Since the U.S. Treasury Department sanctions on cryptocurrency mixer Tornado Cash, the market capitalization of Tether (USDT) tokens has grown by around $2 billion reversing a three-month-old downtrend.
On August 8, the Office of Foreign Asset Control effectively banned Americans from using Tornado Cash by adding 44 addresses for the service’s USD Coin (USDC) and Ether (ETH) to a list of Specially Designated Nationals and Blocked Persons (SDN).
OFAC claims that since 2019, individuals and criminal groups have used Tornado Cash to launder approximately $7 billion in bitcoin. Tornado Cash is also thought to have mingled funds related to North Korean Lazarus Group hackers.
The stablecoin’s creator, Circle, even went so far as to seize assets connected to the 44 addresses that OFAC had blacklisted. Given the implications of continuing to connect with the addresses, Circle’s decision was justified.
Failure to comply can result in fines of $50,000 to $10,000,000 and prison terms of 10 to 30 years. Circle attempted to completely comply with the Treasury judgment by freezing 75,000 USDC worth of funds connected to the accounts in question.
It’s interesting to note that USDC’s market capitalization has dropped by about $2 billion from recent highs of over $55 billion to its current valuation of roughly $53 billion.
Several cryptocurrency market participants have made note of the USDC fall on social media, and a connection has been made between it and the rise in USDT capitalization.
Following the Tornado Cash sanctions, one Twitter user hypothesized that users converted roughly $1.6 billion worth of USDC to USDT:
On Twitter, Paolo Ardoino, CTO of Tether and Bitfinex, also hinted at the “flipping” of USDC-USDT. Through the use of Ethereum smart contracts, both USDC and USDT have the capacity to freeze funds, however only the former issuer announced asset freezes on addresses that were banned.
Cointelegraph has contacted Tether to find out if it plans to freeze USDT held by the blacklisted addresses connected to Tornado Cash, or if this is expected to happen.
The larger cryptocurrency community has also been reassured by Circle and Tether that their respective stablecoin platforms will accept Ethereum’s impending “Merge” to its proof-of-stake Beacon Chain, which is rumored to occur in September.
