• Tether may be violating US restrictions against Tornado Cash

  • Tether, the world’s largest stablecoin by market cap, may be in violation of US Treasury sanctions against Tornado Cash.

    Tornado Cash runs afoul of the United States Treasury.

    The US Treasury Office of Foreign Assets Control (OFAC) added Tornado Cash to its list of sanctioned companies on August 8.

    According to the FBI, Tornado Cash enabled North Korean hackers and other criminal companies to launder billions of dollars in cryptocurrencies gained through illegal means.

    In order to comply with the restrictions, several US companies discontinued relations with the mixer. Circle, for example, blacklisted the organization’s USDC accounts, and Github, which blocked developer access to its platform.

    The repercussions from the fines has highlighted the role of regulators in determining public policy, particularly when it comes to privacy and personal liberties. Especially when Tornado Cash is merely software.

    In a broader sense, as a result of the sanctions, crypto firms have expressed confusion over how to remain legally compliant.

    Tether has not followed Circle’s lead in blacklisting USDT accounts related with Tornado Cash.

    Tether claims that US sanctions do not apply in its operating jurisdiction.

    Officials from the United States government have yet to respond. Tether’s CTO, Paolo Ardoino, confirmed the company “has not been contacted by U.S. officials or law enforcement with a request.”

    He also stated that it is unclear whether Tether, as a Hong Kong-based corporation, is compelled to follow US Treasury punishment procedures. Ardoino has interpreted this, together with Tether’s refusal to “onboard [US] persons as customers,” to suggest that the corporation is not required to follow US sanctions rules.

    Scott Anderson, a former government attorney now with the Brookings Institute, stated that penalty restrictions apply to US nationals, companies, and entities doing business in the US.

    He is dubious, however, whether Tether is actually breaking the rules with its current stand on the topic. Nonetheless, Anderson cautioned that Tether might face “legal consequences” for noncompliance.

    “I don’t know whether Tether falls within that scope or not. But if there is a chance that they (or their employees) might, noncompliance could carry real legal risk.”

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