Yesterday we told why the blocking of Tornado Cash (TC) by the OFAC division of the US Treasury Department is an extremely unpleasant precedent that strikes both the decentralization of the cryptocurrency market and the right to privacy.
To put it briefly, instead of investigating and blocking suspicious addresses, all participants who have ever dealt with a transaction mixing service have been sanctioned. Since the transfer cannot be refused, any person can be compromised by simply sending him the minimum amount via TC.
To demonstrate the absurdity of the decision of the American regulator, an unknown person sent out 440 cryptopers at 0.1 ETH. So, among the victims was Justin Sun, whose account was immediately blocked on the Aave platform.
OFAC has blacklisted TC, which entails sanctions for the use of the mixer by American companies and citizens. However, the regulator did not order companies to block user accounts – this was the conclusion reached by Tether, which daily exchanges operational information on the incident.
American regulators and law enforcement agencies.
Tether criticized Circle, which probably, at its own discretion, blocked 75 thousand USDC in a smart contract. According to the issuer of the first largest stable coin in the blog, excessive promptness of Circle can harm the investigation, since the coins involved in crimes will now remain motionless, and criminals will become more cautious in their actions.
Metrics show that since the USDC was blocked, whales have switched to selling the coin, and its capitalization has decreased by 3.5% in two weeks. At the same time, the capitalization of USDT increased by 1.7%.
Investors could have mistakenly assumed that Tether’s offshore registration would allow the company to ignore the position of the US Treasury Department. However, in yesterday’s blog entry, the company revealed its cards: Tether considers OFAC sanctions as part of its compliance program with international standards. In other words, as soon as the American regulator sends a request to block addresses, it will be immediately executed.
The events that are taking place clearly demonstrate why the crypto community needs a decentralized stablecoin so much, and what is the reason for the rapid rise of UST (Terra) to the third line of the rating of stable coins in a short period of time. Unfortunately, the project could not keep the peg to the US dollar: in May, UST and the internal LUNA coin completely devalued.
Currently, the 91% share of the stablecoin market is occupied by the first three centralized coins, whose loyalty to American regulators is beyond doubt. Circle is directly registered in the USA, Binance has a division there, and Tether is ready to comply with the requirements of American regulators.