Tether’s market cap has reversed a three-month downtrend, while USDC fell in value after the US imposed sanctions on Tornado Cash.
The market cap of Tether (USDT) token has surged nearly $2 billion after the US Treasury imposed sanctions on cryptocurrency mixer Tornado Cash.
The Office of Foreign Assets Control effectively banned Americans from using Tornado Cash on Aug. 8 by adding $44 (USDC) and Ether (ETH) coin addresses associated with the service to its list of Blacklisted Specially Designated Nationals and Blocked Persons (SDN).
OFAC claims that Tornado Cash has been used by individuals and criminal organizations to launder over $7 billion worth of cryptocurrencies since 2019. Funds related to North Korea’s Lazarus Group hackers are also believed to have been mixed up by Tornado Cash.
Circle, the USDC stablecoin issuer, went so far as to freeze assets associated with 44 OFAC-designated addresses. Circle’s move was justified given the possible consequences of continued interaction with addresses.
Penalties for non-compliance range from a $50,000 to $10,000,000 fine and 10 to 30 years in prison. Circle has frozen $75,000 of funds associated with the accounts in question to fully comply with the Treasury Department’s decision.
Interestingly, USDC’s market cap has declined by about $2 billion from a peak of $55 billion last month to a current cap of about $53 billion. The decline in USDC has been noted by various crypto market participants on social media, noting a correlation between the decline in USDC market cap and the rise in USDT capitalization.
A Twitter user suggested that users transferred about $1.6 billion worth of USDC to USDT after the tornado cash sanctions:
Investors moved over $1.6B from #USDC to #USDT after Tornado Cash was blocked pic.twitter.com/nQ9y6xHXi8
— The London Crypto™️ (@TheLondonCrypto) August 16, 2022
Paolo Ardoino, CTO of Tether and cryptocurrency exchange Bitfinex, also teased the USDC-USDT “coup” on Twitter. Both USDC and USDT have the ability to freeze funds using Ethereum’s smart contract feature, but the first issuer was the only issuer to announce asset freezes for blacklisted addresses.
Cointelegraph contacted Tether to find out if it intends or expects to freeze USDT held at blacklisted addresses associated with Tornado Cash.
Both Circle and Tether have also reassured the broader crypto community that both stablecoin platforms will support Ethereum’s upcoming merger with its Proof-of-Stake beacon chain, due in September.