USDT market cap up by $2 billion following Tornado Cash debacle

USDT market cap up by $2 billion following Tornado Cash debacle

Since the U.S. Treasury Department placed sanctions on Tornado Cash, a cryptocurrency mixer, the market capitalization for Tether (USDT tokens) has increased by almost $2 billion.

On Aug. 8, the Office of Foreign Asset Control effectively barred Americans using Tornado Cash, blacklisting 44 USD Coin and Ether addresses that were connected to the service to a special list of Blocked Persons and Specially Designated Nationals (SDN).

OFAC claims that Tornado Cash has been used by criminal organizations and individuals to launder more than $7 billion in cryptocurrency since 2019. Tornado Cash is also believed to have been used to mix funds linked to North Korean Lazarus Group hackers.

Circle, the US-based issuer of USDC stablecoin, took the unusual step of freezing assets associated with 44 addresses identified by OFAC. Circle’s move was justified considering the potential consequences of continuing to interact with these addresses.

Noncompliance can result in fines up to $50,000,000 or 10 to 30 year imprisonment. Circle frozen 75,000 USDC of funds linked with the accounts in question to ensure compliance with the Treasury ruling.

The USDC market cap has fallen by $2 billion, from its peak of $55 billion in the last month to its current capitalization at $53 billion. Many cryptocurrency market participants have noted the USDC drop via social media. A correlation was drawn between the USDC market decline and the USDT capitalization increase.

Twitter user admonished that USDC was transferred to USDT by users 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 ™, August 16, 2022 (@TheLondonCrypto).

Tether’s CTO Paolo Ardoino teased the possibility of USDC-USDT being flipped on Twitter. Both USDC as well as USDT can freeze funds using Ethereum smart contract functionality. However, USDC was the only issuer that announced asset freezes at blacklisted addresses.

Why isn’t anyone talking about it? pic.twitter.com/SEAChZZeLO
— Paolo Ardoino (@paoloardoino) August 14, 2022

Cointelegraph reached out to Tether in order to determine if it plans or expects to freeze USDT that is held at blacklisted addresses related to Tornado Cash.

Tether and Circle have both assured the wider cryptocurrency community that they would support Ethereum’s upcoming “Merge” to its proof-ofstake Beacon Chain. This is expected to occur in September.

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