Tether not blacklisting Tornado Cash, says media report
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Cryptocurrency company Tether is violating US Treasury Department sanctions by not blacklisting Tornado Cash, says a media report.
The Washington Post reported Wednesday that Tether, the backer of the USDT stablecoin, is not adhering to sanctions imposed on Tornado Cash (TORN), a crypto mixer, earlier this month. The Post published its report after analyzing data from crypto-intelligence firm Dune Analytics.
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USDT to USD
Mixer shields owner’s identities
A crypto mixer pools digital assets to shield their owners’s identities. While mixers are often used for legitimate privacy protection, they have also been used for illicit purposes.
USDT is the world’s largest stablecoin. Since the coins are underpinned by the US dollar, they are supposedly more stable than altcoins, which have no underlying financial reserves.
Treasury alleged that Tornado Cash allowed North Korean state-backed hackers and other illicit groups to launder billions of dollars. According to Treasury, Tornado Cash was used to launder more than $7bn (£5.92bn) worth of virtual currency since the company’s inception in 2019.
Most companies quickly complied with the sanctions. But Jeremy Allaire, CEO of Circle, the blockchain operator that backs the USDC stablecoin, said that Treasury crossed a line by trying to block or limit open-source software.
Other crypto companies have also criticized Treasury’s move.
ATOM to USD
Code impossible to edit
According to the Post, the creators of Tornado Cash’s code made it impossible to edit. Treasury has not taken any disciplinary action.
“Tether has not been contacted by US officials or law enforcement with a request” to freeze transactions with Tornado Cash, Tether’s chief technology officer, Paolo Ardoino, said in a statement to the Post.
Ardoino added that the company “normally complies with requests from US authorities.” But he told the Post that, as a Hong Kong-based company, Tether is not required to honour the sanctions against Tornado Cash.
But he said that Tether considers Treasury sanctions “as part of its world-class compliance program.”
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Dangerous ground
A former senior official with the regulator’s Office of Foreign Assets Control (OFAC) told the Post that Tether is “treading on dangerous ground.”
“It’s never a very good idea to test OFAC.,” said the former official who was granted anonymity. “Right now, it’s a particularly bad time for any crypto-related company to do that. It looks like that’s what they’re doing.”
Popular money-laundering tool
Blockchain analytics firm TRM Labs said in an 8 August blog post that Tornado Cash is a favourite money-laundering tool of North Korean cybercriminals.
According to TRM, they have used Tornado Cash to launder stolen funds in 10 of their most recent crypto heists at an estimated value of nearly $1bn, including in the $620m Ronin Bridge hack.
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