Treasury sanctions against Tornado Cash, a company that helped launder money for Kim Jong-un’s hacking army, is tripping up one of the world’s largest crypto companies. KevinTDugan writes on the weirdness going on between the Treasury and Tether
Photo-Illustration: Intelligencer If there’s any lesson crypto companies should have learned from this year so far — a mere eight months that have vaporized some $2 trillion in value — it’s that the world’s continued existence doesn’t depend on them being around. It wasn’t always this way, though. Last year, the U.S. Treasury issued a report on a specific subset of the crypto world known as stablecoins and the potential that its collapse could trigger a Lehman Brothers–type economic implosion.
So what’s happening right now between the Treasury and Tether is a little weird. For the past year, the federal department has been ramping up its regulation of cryptocurrencies and recently blacklisted a company called Tornado Cash that delves deep into financial crazy areas by anonymizing crypto transactions — a tool that was allegedly used by North Korean hackers to launder about $500 million in stolen cryptocurrency. Tether was not accused of doing anything wrong.
So far, the U.S. government has not taken action. “Tether has not been contacted by U.S. officials or law enforcement with a request” to freeze transactions with Tornado Cash, Tether’s chief technology officer, Paolo Ardoino, said in a statement, adding that the company “normally complies with requests from U.S. authorities.” Chutzpah is the word that comes to mind. Sanctions are a tool of economic isolation, a way to crush a company or a country by starving it of financial resources.
What’s striking about this is how Tether’s response to all this — that the rules don’t apply — feels like a losing one after a long period in which it seemed as if crypto companies could do whatever they wanted. Lower in the story, Tether makes the argument that it’s really a Hong Kong company, so it doesn’t have to listen to what the Treasury says. But that’s not how it works, especially since Tether has previously submitted to U.S.
There are plenty of good arguments against sanctioning Tornado Cash and other anonymizing services, but these aren’t the arguments Tether is making. But whether Tether can really get away with doing this is a whole other question. Tether lost about a quarter of its holdings since its November peak, a run that led the digital currency to slip a little from its $1 value. . At the same time, money came rushing into its largest competitor, USD Coin, which does basically the same thing.
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