20 ms·

Tether will not freeze Tornado Cash addresses

142 points by dgs_sgd 4y ago

otoburb 4y ago
>>Tether has not been contacted by US officials or law enforcement with a request to freeze the addresses sanctioned by OFAC, but as noted above, Tether normally complies with requests from US authorities, being in contact with them almost on a daily basis. Rephrased as: "US Treasury, we're ready to lock & freeze as many addresses as you need -- just give us the word!"
- altairprime 4y ago
  > “a request to freeze the addresses sanctioned” Emphasis added. The precision of their statement allows for having received other requests.
- NikolaNovak 4y ago
  I am ignorant, but do they expect government to contact them? I assumed sanctions are sanctions - you broadcast publish them rather than try to inform each and every entity specifically. So this feels like either incompetent ignorance, Or wilful pretence ignorance. <snide comment> Which, hey, Crypto... </snide comment>
  - koolba 4y ago
    The US government should publish a contract with a single, isBanned(address), function that implementers can leverage to stay compliant. For efficiency they could just have it return “true” for everybody.
    - thebeastie 4y ago
      “If US Government ever make applications for Ethereum, it means I’ve won.” Vitalik Buterin, probably.
    - arcticbull 4y ago
      They already do, it's the OFAC SDN list. [1] Everyone in the money transmission business is not just free to leverage this list but required by law to. If you search for 'tornado' in the plain text version, you'll find the list of blacklisted addresses. [1] https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists https://home.treasury.gov/policy-issues/financial-sanctions/...
      - ETH_start 4y ago
        It's incredible how national security became the channel through which to make the US internet more like China's state controlled one.
        indymike 4y ago
        National security is usually the justification for oppression, followed by "the common good".
        ETH_start 4y ago
        National security is a subset of "the common good" argument, but one more focused on averting harm, than improving the state of society.
        arcticbull 4y ago
        The only way you'd come to that conclusion is if you'd never been to the PRC. The SDN list has nothing, and I do mean nothing, to do with internet censorship.
        ETH_start 4y ago
        This is nothing compared to China-level internet censorship, but barring Americans from interacting with a decentralized protocol that a contract address on the SDN list resolves to, is censorship. And the restrictions will have to massively escalate, possibly to CCP-levels (with restrictions on end-user access strong encryption) to effectively enforce such prohibitions, as cryptocurrency becomes more ubiquitous.
    - BLanen 4y ago
      I don't know if this is a joke, but no.
      - rixthefox 4y ago
        Yes, the quote was originally Linus Torvalds saying "If Microsoft ever builds applications for Linux then I've won". Can't find a direct source from when he said it but that's what the joke was referencing.
- nl 4y ago
  That's not how this work. Sanction violation is a strict liability offense - it is incumbent on companies to make sure they don't violate sanctions. With this statement Tether is.. dumb? It's impossible for them to claim they didn't know about it. They are domiciled in Hong Kong, but BitFienex (their sister company) recently agreed to pay $18M+ in fines to New York for finance law violations so it's not like they are beyond the reach of US law.
  - JumpCrisscross 4y ago
    > are domiciled in Hong Kong They're a U.S. dollar stablecoin operator. If they get hit with secondary sanctions it literally becomes illegal for a Tether to be redeemed for dollars. I have no doubt it will continue printing tape at parity, but at least the smart money will know what's going on.
    - arcticbull 4y ago
      Tether is already under no obligation to redeem Tethers for dollars according to their own terms and conditions [1]. They are only obligated to redeem for people they at their sole discretion deem to be 'customers,' ([1] § 3) they can then arbitrarily delay that redemption for as long as they see fit for basically any reason ([1] § 3) and they can substitute the redemption for any assets they may or may not have on hand ([1] § 3). Most assuredly at any value they deem fit. On top of that there's a final blanket ban (net of 'exceptions') for any and all US persons ([1] § 3.3). [1] https://tether.to/legal https://tether.to/legal
      - JumpCrisscross 4y ago
        > can then arbitrarily delay that redemption for as long as they see fit for basically any reason If they're sanctioned, they can't redeem whether they want to or not. Holding Tether if it gets sanctioned would be like having U.S. dollar bank deposits at an Iranian bank. Yes, they may have other assets, but you can't legally accept them nor their proceeds. > there's a final blanket ban (net of 'exceptions') for any and all US persons This is meaningless. Tether use U.S. dollars. They're subject U.S. jurisdiction.
- A4ET8a8uTh0 4y ago
  I mean.. that is basically how ALL entities ( and individuals ) in US are expected to behave. Now, Tether as an entity is based in Hong Kong, but, as one theory goes, the moment it touches US dollar it is in OFAC's scope. And tether does do just that. Not to search very far, more recent SDN update had a whole bunch addresses to be blocked. I am all but certain none of the US based entities even thought of not complying. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/...
- Cthulhu_ 4y ago
  > Rephrased as: "US Treasury, we're ready to lock & freeze as many addresses as you need -- just give us the word!" Well yeah, what do you expect? The treasury has this right / mandate, and noncompliance will lead to revocation of licenses. They don't fuck around.
davidgerard 4y ago
This looks a bit like Tether attempting to steal DeFi market share from USDC - as Circle is a US entity, USDC blocked all the addresses immediately.
politician 4y ago
OFAC rules don’t require notice by a government agency. They’re automatically incumbent upon all citizens to follow.
- 323 4y ago
  Correct. I've worked in a company which dealt with user money and it was our duty to figure out if someone opening an account was sanctioned. Which was actually hard because you just have lists of names which can be pretty vague like "John Doe, Florida".
  - mh8h 4y ago
    There are services for exactly that check. See Equifax OFAC Alert as an example.
    - pirate787 4y ago
      Treasury.gov also offers a free public API
- geraldwhen 4y ago
  I’m surprised their lawyers don’t understand this. Sanctions are not a thing that you get a alerted to. You need to follow who and what is sanctioned and bake compliance into your entire company when handling money.
  - mikeyouse 4y ago
    Right - the legal term of art is strict liability. Perkins Coie has a little explainer: https://www.perkinscoie.com/en/news-insights/ofac-releases-new-detailed-guidance-for-the-digital-currency-industry.html https://www.perkinscoie.com/en/news-insights/ofac-releases-n...
  - wmf 4y ago
    Tether is an offshore money laundering company with clown lawyers so they're not really down with any kind of US regulations.
loeg 4y ago
Tether has never worried about the rule of law before; why start now?
- wslh 4y ago
  There is not a single rule of law. This is not an statement in favor or against Tether.
  - loeg 4y ago
    What do the first few letters of USDT stand for?
    - chinathrow 4y ago
      3 characters purely selected for marketing reasons. It could also be named WHCRST or any other name.
      - loeg 4y ago
        It's extremely relevant that it tries to maintain a 1:1 peg with USD, not whatever currency WHCRS is. The US controls law around the US dollar.
        chinathrow 4y ago
        The naming of the coin itself is for sure not relevant of its functionality, or what am I missing here? The pegging is not achieved within the name itself.
- bioemerl 4y ago
  If the United States government wanted to kill crypto forever they could sanction tether and make all of the coin useless. They're going to worry really hard about rule of law eventually
  - 4y ago
WXLCKNO 4y ago
The only stablecoin people should use through Tornado Cash is DAI.
- paulpauper 4y ago
  this would not work for defi though
- tick_tock_tick 4y ago
  But the largest backing asset of DAI is USDC....
- ETH_start 4y ago
  RAI is even more censorship resistant, as it has no centralized collateral.
lavventura 4y ago
this news was enough to pump Tornado Cash 50% and dumped 40% afterwards
eganist 4y ago
Is this essentially admission of non-adherence to OFAC requirements?
- upupandup 4y ago
  Think they are looking for the USG to sanction them....hear me out: what better way to never have to redeem ppl than being sanctioned? oh we are a stablecoin and we want to cash your tether to USD but unfortunately we got sanctioned ---> pass blame to USG I can't believe they are this stupid and brazen enough to challenge the USG like this.
  - rossdavidh 4y ago
    This is a very interesting theory.
  - wmf 4y ago
    Another comment in this thread asked what happens to the backing assets when USDT gets sanctioned. Imagine if large amounts of USDT get sanctioned so Tether can refuse to ever redeem them, yet they keep the collateral. They could go from insolvent to super-profitable overnight!
    - upupandup 4y ago
      Tether will get to keep all the bitcoins and people will be holding the bags.
  - deleted 4y ago
    [deleted]
  - yladiz 4y ago
    They can attempt to pass the blame to the US Gov't, and maybe some individuals would be fooled, but larger investors wouldn't be and would see through their ruse and would both be upset and basically lose any faith they have in the system, making the value of Tether plummet. No one would touch Tether, making it worthless, since the big exchanges would then not let you exchange between <Coin> <-> Tether, and so even if they have some assets backing them up they would effectively be worthless as a company because of loss of trust.
yuan43 4y ago
> ... In fact, in our dealings with law enforcement we are sometimes made aware of addresses potentially related to crime and are specifically instructed not to freeze the addresses without the explicit request from law enforcement as this could alert suspects of the law enforcement investigation, cause liquidations or abandonment of funds and jeopardize further connections that might have been established. I'm not sure what's worse: the fact that an important chunk of Tether can be with blocked with just the slightest due process, or the fact that that the same lack of due process can keep addresses unblocked. It's also hilarious how different parts of the executive branch seem to be at odds with each other over what to do. Treasury says blacklist now, ask questions later, and DoJ says (or might at least be thinking) wait, wait - don't blacklist, we're following perps on the blockchain. Those who believe that the long arm of the law is bearing down on Tether might want to consider the possibility that Tether will remain operational much longer than seems reasonable. As revealed in this article, it's become a very useful tool for conducting criminal investigations.
- stormbrew 4y ago
  This kind of cognitive dissonance is, I think, not unusual. I once worked for a website that was largely used by teenagers and we cooperated extensively with police to deal with predators on the site, but were largely told to keep that fact hush hush so they could use us as a honeypot. Guess what parents thought of us.
  - Griffinsauce 4y ago
    A honeypot filled with potential victims if you miss one. The parents were right.
    - stormbrew 4y ago
      Maybe. That's a somewhat different issue though. The police had us implicitly make the site more attractive to predators, making it even more dangerous than it could have been at a baseline while still having us work hard to prevent it. On the issue of the baseline, though, I think this is a tricky thing. The alternatives teenagers used at the time were far more lax in their enforcement and moderation policies, but because they were made by bigger companies they got a pass from parents. The idea that we can keep teenagers completely away from dangerous things on social media feels a lot like abstinence education to me. The reality is complicated. But I don't think we were perfect - tbh I don't think we were at all well equipped to the responsibility. But I do think we tried.
faangiq 4y ago
This is fairly comical given that tether itself is a criminal enterprise.
georgewsinger 4y ago
Over the past few years people have presented a lot of (seemingly credible, IMO) red flags that Tether could be something resembling a scam, and on the verge of a sudden "bankrun" at any moment. The consensus opinion, at least 6 months ago, was that Tether = scam. Yet they've survived the crypto crash, and their coin is still pegged to the dollar. I'm curious what people make of this? Have opinions changed?
- tmpz22 4y ago
  If the trade volume is low wouldn't that mean the value of any assets would not be reflective of the market? Like if I peg my stuffed animal to a dollar and then made a bunch of blog posts about the stability of my stuffed animal value, is it really noteworthy? I'm a crypto noob, so my comment is pure curiosity - apologies if its naive of info I'm just unaware of.
  - chucksmash 4y ago
    Sure, and I'm free to value my home at 1 gigadollar. Sellers are free to decide what prices they will not sell below, but they do not determine price. It takes buyers and sellers to do that. I'd have a better argument that my home was worth $1 billion if inside the guest bedroom there was USD 1 billion. That'd be a pretty good way to convince buyers that my home's price was pegged to the value of one giga dollar. If it was $900 million in cash and $100 million in IOUs, that'd still convince some people too, so on and so forth. I gather the issues with Tether are a) we don't know just what they have because of a lack of transparency, b) from what we DO know, in chasing yield, they've picked up some higher risk assets that they say are baaaaasically the same as cash (Commercial paper from Chinese real estate developers iirc?) that could be susceptible to losing value in a financial contagion scenario, and therefore be worth less than the dollar put in when Joe Q Crypto wants to take his dollar back out.
- mckirk 4y ago
  I have to admit, I did not expect them to be able to weather a crash like the recent one, and I've mentally upgraded Tether from 'could go at any moment and take the crypto market with it' to 'will need some good reason to tank, and likely be only one of the later dominos to fall'. That doesn't mean I think of Tether as an asset to put much trust in, since I still expect there to be quite some shenanigans at work in the background, but it seems they've at least built their empire on more solid ground than many people expected.
paulpauper 4y ago
Teather and USDC will freeze funds with any court order. Unless it's defi, these are worse even keeping money in a Greece or Lebanese bank account...pure centralization, no protection.
rossdavidh 4y ago
So, if Tether _were_ to freeze Tornado Cash addresses, do we have any idea of how bad this would be for Tether? As in, how much of the volume through Tether would be impacted? I'm just speculating here, but is it perhaps the case that Tether cannot afford to freeze Tornado Cash addresses without entering some sort of vicious spiral downwards, as lower volume makes it harder to keep the peg, which makes volume (in) even lower, which makes it even harder to keep the peg, etc.? Just uninformed speculation, I don't know the crypto space, just throwing it out for the more informed to comment on.
throwaway4good 4y ago
So if tether or usdcoin freezes an address and that address never gets unfrozen like it looks like will be the case here. Who gets the dollars presumably held by tether? Is it just left at tether or would tether pay the us treasury?
- coolspot 4y ago
  No one gets the dollars until US issues a separate seizure order (by court or judge).
- herendin 4y ago
  A good question. Freezing is not the same as seizing, and it's not even clear in which countries all those alleged Tether dollars are or in what form they are held If it's true that Tether is based on fractional reserves, then having the US freezing their customers' assets seems helpful for Tether, as they will have more free assets to use
- arlcode 4y ago
  If it gets seized due to government action the rightful owners can go to court and may or may not win there. Not very crypto but certainly very real world
londons_explore 4y ago
I feel like this is an attempt to allow as many tornado cash users as possible to withdraw their money from the liquidity pools. By being 'slow' to block this address, it gives people time to withdraw. Remember that many tornado cash users are not money laundering too.
- arlcode 4y ago
  I think this is mostly a side effect in this case (though a welcome one for honest users). The government is still figuring out how to best tackle sanctions in crypto space and they just started doing it for real. L We will probably see some experimentation and some regulatory and enforcement dead ends until it becomes clear what works and what doesn't
JonathanBeuys 4y ago
What does it mean to "freeze Tornado Cash addresses"? I can't make anything of this sentence. Wouldn't miners be the only ones to "freeze" assets on an Ethereum address, and only if 51% of them collude to not accept blocks in which funds from those addresses are moved?
- tylersmith 4y ago
  Most big stable coins have centralized control over issuing, removing, and freezing their tokens. It's built into their contracts.
  - JonathanBeuys 4y ago
    I thought Tether is an ERC20 token on the Ethereum blockchain? How would Tether "freeze" one of the tokens, so it cannot be moved anymore?
    - saurik 4y ago
      (I am providing a different answer, not building on the prior one.) Tether is a centralized financial service which mints USDT in exchange for USD and lets you redeem USDT later for USD (using fiat bank wire transfers in and out, taking a small but non-negligible cut in both directions, and so $0.9987 or somewhere around there is the true power bound target of the currency, not $1.00). Honestly, I am not sure how their service is legal in the US under merely FinCEN regulations (the ones that prevent you from selling large prepaid gift cards and redeeming them for cash), OFAC aside...
      - imtringued 4y ago
        It's not legal which is why they are based outside the US.
    - m19 4y ago
      Not all ERC20 tokens are created equal, it simply means that the token implemented the ERC20 interface, it has a transfer() function as per the ERC20 spec, but that transfer() can check if an address is blacklisted. For example, take the WETH
JaggerFoo 4y ago
Way to go Tether you're our decentralized hero! You're so awesome! You should book an appearance on "Bankless" and take a bow so the crypto community can bask in your bravery. Sheesh, crypto is like junior high school. Cheers
nathias 4y ago
I don't rally get what the US made illegal in this case? The name? The instance? It is trivial to fork tornado.cash and deploy it as hurricane.cash, is that legal then?
- ETH_start 4y ago
  It sanctioned use of a particular decentralized protocol, that is resolved by the contract addresses that it added to the SDN list. It's highly likely OFAC overstepped its statutory powers in doing so: https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-entity-in-the-tornado-cash-case/ https://www.coincenter.org/analysis-what-is-and-what-is-not-... One indication that its action stands on weak legal footing is that it had to mischaracterize the autonomous protocol as part of an entity that includes the Tornado Cash developers and DAO in its press release, just to rationalize the designation. The protocol, being immutable, is outside the control of any party, including the open source developers who wrote its code, so is obviously not a part of any such entity.
Yizahi 4y ago
- "And what are you gonna do to us? Force operations to the offshore? Force us to use shady offshore bank? Not allow USD to USDT pairs?" (c) Giancarlo, laughing probably, sitting on a billions of mafia cash.

142 points by dgs_sgd 4y ago

>>Tether has not been contacted by US officials or law enforcement with a request to freeze the addresses sanctioned by OFAC, but as noted above, Tether normally complies with requests from US authorities, being in contact with them almost on a daily basis. Rephrased as: "US Treasury, we're ready to lock & freeze as many addresses as you need -- just give us the word!"

altairprime 4y ago
> “a request to freeze the addresses sanctioned” Emphasis added. The precision of their statement allows for having received other requests.
NikolaNovak 4y ago
I am ignorant, but do they expect government to contact them? I assumed sanctions are sanctions - you broadcast publish them rather than try to inform each and every entity specifically. So this feels like either incompetent ignorance, Or wilful pretence ignorance. <snide comment> Which, hey, Crypto... </snide comment>
- koolba 4y ago
  The US government should publish a contract with a single, isBanned(address), function that implementers can leverage to stay compliant. For efficiency they could just have it return “true” for everybody.
  - thebeastie 4y ago
    “If US Government ever make applications for Ethereum, it means I’ve won.” Vitalik Buterin, probably.
  - arcticbull 4y ago
    They already do, it's the OFAC SDN list. [1] Everyone in the money transmission business is not just free to leverage this list but required by law to. If you search for 'tornado' in the plain text version, you'll find the list of blacklisted addresses. [1] https://home.treasury.gov/policy-issues/financial-sanctions/specially-designated-nationals-and-blocked-persons-list-sdn-human-readable-lists https://home.treasury.gov/policy-issues/financial-sanctions/...
    - ETH_start 4y ago
      It's incredible how national security became the channel through which to make the US internet more like China's state controlled one.
      - indymike 4y ago
        National security is usually the justification for oppression, followed by "the common good".
        ETH_start 4y ago
        National security is a subset of "the common good" argument, but one more focused on averting harm, than improving the state of society.
      - arcticbull 4y ago
        The only way you'd come to that conclusion is if you'd never been to the PRC. The SDN list has nothing, and I do mean nothing, to do with internet censorship.
        ETH_start 4y ago
        This is nothing compared to China-level internet censorship, but barring Americans from interacting with a decentralized protocol that a contract address on the SDN list resolves to, is censorship. And the restrictions will have to massively escalate, possibly to CCP-levels (with restrictions on end-user access strong encryption) to effectively enforce such prohibitions, as cryptocurrency becomes more ubiquitous.
  - BLanen 4y ago
    I don't know if this is a joke, but no.
    - rixthefox 4y ago
      Yes, the quote was originally Linus Torvalds saying "If Microsoft ever builds applications for Linux then I've won". Can't find a direct source from when he said it but that's what the joke was referencing.
nl 4y ago
That's not how this work. Sanction violation is a strict liability offense - it is incumbent on companies to make sure they don't violate sanctions. With this statement Tether is.. dumb? It's impossible for them to claim they didn't know about it. They are domiciled in Hong Kong, but BitFienex (their sister company) recently agreed to pay $18M+ in fines to New York for finance law violations so it's not like they are beyond the reach of US law.
- JumpCrisscross 4y ago
  > are domiciled in Hong Kong They're a U.S. dollar stablecoin operator. If they get hit with secondary sanctions it literally becomes illegal for a Tether to be redeemed for dollars. I have no doubt it will continue printing tape at parity, but at least the smart money will know what's going on.
  - arcticbull 4y ago
    Tether is already under no obligation to redeem Tethers for dollars according to their own terms and conditions [1]. They are only obligated to redeem for people they at their sole discretion deem to be 'customers,' ([1] § 3) they can then arbitrarily delay that redemption for as long as they see fit for basically any reason ([1] § 3) and they can substitute the redemption for any assets they may or may not have on hand ([1] § 3). Most assuredly at any value they deem fit. On top of that there's a final blanket ban (net of 'exceptions') for any and all US persons ([1] § 3.3). [1] https://tether.to/legal https://tether.to/legal
    - JumpCrisscross 4y ago
      > can then arbitrarily delay that redemption for as long as they see fit for basically any reason If they're sanctioned, they can't redeem whether they want to or not. Holding Tether if it gets sanctioned would be like having U.S. dollar bank deposits at an Iranian bank. Yes, they may have other assets, but you can't legally accept them nor their proceeds. > there's a final blanket ban (net of 'exceptions') for any and all US persons This is meaningless. Tether use U.S. dollars. They're subject U.S. jurisdiction.
A4ET8a8uTh0 4y ago
I mean.. that is basically how ALL entities ( and individuals ) in US are expected to behave. Now, Tether as an entity is based in Hong Kong, but, as one theory goes, the moment it touches US dollar it is in OFAC's scope. And tether does do just that. Not to search very far, more recent SDN update had a whole bunch addresses to be blocked. I am all but certain none of the US based entities even thought of not complying. https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions/20220808 https://home.treasury.gov/policy-issues/financial-sanctions/...
Cthulhu_ 4y ago
> Rephrased as: "US Treasury, we're ready to lock & freeze as many addresses as you need -- just give us the word!" Well yeah, what do you expect? The treasury has this right / mandate, and noncompliance will lead to revocation of licenses. They don't fuck around.

davidgerard 4y ago

This looks a bit like Tether attempting to steal DeFi market share from USDC - as Circle is a US entity, USDC blocked all the addresses immediately.

politician 4y ago

OFAC rules don’t require notice by a government agency. They’re automatically incumbent upon all citizens to follow.

323 4y ago
Correct. I've worked in a company which dealt with user money and it was our duty to figure out if someone opening an account was sanctioned. Which was actually hard because you just have lists of names which can be pretty vague like "John Doe, Florida".
- mh8h 4y ago
  There are services for exactly that check. See Equifax OFAC Alert as an example.
  - pirate787 4y ago
    Treasury.gov also offers a free public API
geraldwhen 4y ago
I’m surprised their lawyers don’t understand this. Sanctions are not a thing that you get a alerted to. You need to follow who and what is sanctioned and bake compliance into your entire company when handling money.
- mikeyouse 4y ago
  Right - the legal term of art is strict liability. Perkins Coie has a little explainer: https://www.perkinscoie.com/en/news-insights/ofac-releases-new-detailed-guidance-for-the-digital-currency-industry.html https://www.perkinscoie.com/en/news-insights/ofac-releases-n...
- wmf 4y ago
  Tether is an offshore money laundering company with clown lawyers so they're not really down with any kind of US regulations.

loeg 4y ago

Tether has never worried about the rule of law before; why start now?

wslh 4y ago
There is not a single rule of law. This is not an statement in favor or against Tether.
- loeg 4y ago
  What do the first few letters of USDT stand for?
  - chinathrow 4y ago
    3 characters purely selected for marketing reasons. It could also be named WHCRST or any other name.
    - loeg 4y ago
      It's extremely relevant that it tries to maintain a 1:1 peg with USD, not whatever currency WHCRS is. The US controls law around the US dollar.
      - chinathrow 4y ago
        The naming of the coin itself is for sure not relevant of its functionality, or what am I missing here? The pegging is not achieved within the name itself.
bioemerl 4y ago
If the United States government wanted to kill crypto forever they could sanction tether and make all of the coin useless. They're going to worry really hard about rule of law eventually
- 4y ago

WXLCKNO 4y ago

The only stablecoin people should use through Tornado Cash is DAI.

paulpauper 4y ago
this would not work for defi though
tick_tock_tick 4y ago
But the largest backing asset of DAI is USDC....
ETH_start 4y ago
RAI is even more censorship resistant, as it has no centralized collateral.

lavventura 4y ago

this news was enough to pump Tornado Cash 50% and dumped 40% afterwards

eganist 4y ago

Is this essentially admission of non-adherence to OFAC requirements?

upupandup 4y ago
Think they are looking for the USG to sanction them....hear me out: what better way to never have to redeem ppl than being sanctioned? oh we are a stablecoin and we want to cash your tether to USD but unfortunately we got sanctioned ---> pass blame to USG I can't believe they are this stupid and brazen enough to challenge the USG like this.
- rossdavidh 4y ago
  This is a very interesting theory.
- wmf 4y ago
  Another comment in this thread asked what happens to the backing assets when USDT gets sanctioned. Imagine if large amounts of USDT get sanctioned so Tether can refuse to ever redeem them, yet they keep the collateral. They could go from insolvent to super-profitable overnight!
  - upupandup 4y ago
    Tether will get to keep all the bitcoins and people will be holding the bags.
- deleted 4y ago
  [deleted]
- yladiz 4y ago
  They can attempt to pass the blame to the US Gov't, and maybe some individuals would be fooled, but larger investors wouldn't be and would see through their ruse and would both be upset and basically lose any faith they have in the system, making the value of Tether plummet. No one would touch Tether, making it worthless, since the big exchanges would then not let you exchange between <Coin> <-> Tether, and so even if they have some assets backing them up they would effectively be worthless as a company because of loss of trust.

yuan43 4y ago

> ... In fact, in our dealings with law enforcement we are sometimes made aware of addresses potentially related to crime and are specifically instructed not to freeze the addresses without the explicit request from law enforcement as this could alert suspects of the law enforcement investigation, cause liquidations or abandonment of funds and jeopardize further connections that might have been established. I'm not sure what's worse: the fact that an important chunk of Tether can be with blocked with just the slightest due process, or the fact that that the same lack of due process can keep addresses unblocked. It's also hilarious how different parts of the executive branch seem to be at odds with each other over what to do. Treasury says blacklist now, ask questions later, and DoJ says (or might at least be thinking) wait, wait - don't blacklist, we're following perps on the blockchain. Those who believe that the long arm of the law is bearing down on Tether might want to consider the possibility that Tether will remain operational much longer than seems reasonable. As revealed in this article, it's become a very useful tool for conducting criminal investigations.

stormbrew 4y ago
This kind of cognitive dissonance is, I think, not unusual. I once worked for a website that was largely used by teenagers and we cooperated extensively with police to deal with predators on the site, but were largely told to keep that fact hush hush so they could use us as a honeypot. Guess what parents thought of us.
- Griffinsauce 4y ago
  A honeypot filled with potential victims if you miss one. The parents were right.
  - stormbrew 4y ago
    Maybe. That's a somewhat different issue though. The police had us implicitly make the site more attractive to predators, making it even more dangerous than it could have been at a baseline while still having us work hard to prevent it. On the issue of the baseline, though, I think this is a tricky thing. The alternatives teenagers used at the time were far more lax in their enforcement and moderation policies, but because they were made by bigger companies they got a pass from parents. The idea that we can keep teenagers completely away from dangerous things on social media feels a lot like abstinence education to me. The reality is complicated. But I don't think we were perfect - tbh I don't think we were at all well equipped to the responsibility. But I do think we tried.

faangiq 4y ago

This is fairly comical given that tether itself is a criminal enterprise.

georgewsinger 4y ago

Over the past few years people have presented a lot of (seemingly credible, IMO) red flags that Tether could be something resembling a scam, and on the verge of a sudden "bankrun" at any moment. The consensus opinion, at least 6 months ago, was that Tether = scam. Yet they've survived the crypto crash, and their coin is still pegged to the dollar. I'm curious what people make of this? Have opinions changed?

tmpz22 4y ago
If the trade volume is low wouldn't that mean the value of any assets would not be reflective of the market? Like if I peg my stuffed animal to a dollar and then made a bunch of blog posts about the stability of my stuffed animal value, is it really noteworthy? I'm a crypto noob, so my comment is pure curiosity - apologies if its naive of info I'm just unaware of.
- chucksmash 4y ago
  Sure, and I'm free to value my home at 1 gigadollar. Sellers are free to decide what prices they will not sell below, but they do not determine price. It takes buyers and sellers to do that. I'd have a better argument that my home was worth $1 billion if inside the guest bedroom there was USD 1 billion. That'd be a pretty good way to convince buyers that my home's price was pegged to the value of one giga dollar. If it was $900 million in cash and $100 million in IOUs, that'd still convince some people too, so on and so forth. I gather the issues with Tether are a) we don't know just what they have because of a lack of transparency, b) from what we DO know, in chasing yield, they've picked up some higher risk assets that they say are baaaaasically the same as cash (Commercial paper from Chinese real estate developers iirc?) that could be susceptible to losing value in a financial contagion scenario, and therefore be worth less than the dollar put in when Joe Q Crypto wants to take his dollar back out.
mckirk 4y ago
I have to admit, I did not expect them to be able to weather a crash like the recent one, and I've mentally upgraded Tether from 'could go at any moment and take the crypto market with it' to 'will need some good reason to tank, and likely be only one of the later dominos to fall'. That doesn't mean I think of Tether as an asset to put much trust in, since I still expect there to be quite some shenanigans at work in the background, but it seems they've at least built their empire on more solid ground than many people expected.

paulpauper 4y ago

Teather and USDC will freeze funds with any court order. Unless it's defi, these are worse even keeping money in a Greece or Lebanese bank account...pure centralization, no protection.

rossdavidh 4y ago

So, if Tether _were_ to freeze Tornado Cash addresses, do we have any idea of how bad this would be for Tether? As in, how much of the volume through Tether would be impacted? I'm just speculating here, but is it perhaps the case that Tether cannot afford to freeze Tornado Cash addresses without entering some sort of vicious spiral downwards, as lower volume makes it harder to keep the peg, which makes volume (in) even lower, which makes it even harder to keep the peg, etc.? Just uninformed speculation, I don't know the crypto space, just throwing it out for the more informed to comment on.

throwaway4good 4y ago

So if tether or usdcoin freezes an address and that address never gets unfrozen like it looks like will be the case here. Who gets the dollars presumably held by tether? Is it just left at tether or would tether pay the us treasury?

coolspot 4y ago
No one gets the dollars until US issues a separate seizure order (by court or judge).
herendin 4y ago
A good question. Freezing is not the same as seizing, and it's not even clear in which countries all those alleged Tether dollars are or in what form they are held If it's true that Tether is based on fractional reserves, then having the US freezing their customers' assets seems helpful for Tether, as they will have more free assets to use
arlcode 4y ago
If it gets seized due to government action the rightful owners can go to court and may or may not win there. Not very crypto but certainly very real world

londons_explore 4y ago

I feel like this is an attempt to allow as many tornado cash users as possible to withdraw their money from the liquidity pools. By being 'slow' to block this address, it gives people time to withdraw. Remember that many tornado cash users are not money laundering too.

arlcode 4y ago
I think this is mostly a side effect in this case (though a welcome one for honest users). The government is still figuring out how to best tackle sanctions in crypto space and they just started doing it for real. L We will probably see some experimentation and some regulatory and enforcement dead ends until it becomes clear what works and what doesn't

JonathanBeuys 4y ago

What does it mean to "freeze Tornado Cash addresses"? I can't make anything of this sentence. Wouldn't miners be the only ones to "freeze" assets on an Ethereum address, and only if 51% of them collude to not accept blocks in which funds from those addresses are moved?

tylersmith 4y ago
Most big stable coins have centralized control over issuing, removing, and freezing their tokens. It's built into their contracts.
- JonathanBeuys 4y ago
  I thought Tether is an ERC20 token on the Ethereum blockchain? How would Tether "freeze" one of the tokens, so it cannot be moved anymore?
  - saurik 4y ago
    (I am providing a different answer, not building on the prior one.) Tether is a centralized financial service which mints USDT in exchange for USD and lets you redeem USDT later for USD (using fiat bank wire transfers in and out, taking a small but non-negligible cut in both directions, and so $0.9987 or somewhere around there is the true power bound target of the currency, not $1.00). Honestly, I am not sure how their service is legal in the US under merely FinCEN regulations (the ones that prevent you from selling large prepaid gift cards and redeeming them for cash), OFAC aside...
    - imtringued 4y ago
      It's not legal which is why they are based outside the US.
  - m19 4y ago
    Not all ERC20 tokens are created equal, it simply means that the token implemented the ERC20 interface, it has a transfer() function as per the ERC20 spec, but that transfer() can check if an address is blacklisted. For example, take the WETH

JaggerFoo 4y ago

Way to go Tether you're our decentralized hero! You're so awesome! You should book an appearance on "Bankless" and take a bow so the crypto community can bask in your bravery. Sheesh, crypto is like junior high school. Cheers

nathias 4y ago

I don't rally get what the US made illegal in this case? The name? The instance? It is trivial to fork tornado.cash and deploy it as hurricane.cash, is that legal then?

ETH_start 4y ago
It sanctioned use of a particular decentralized protocol, that is resolved by the contract addresses that it added to the SDN list. It's highly likely OFAC overstepped its statutory powers in doing so: https://www.coincenter.org/analysis-what-is-and-what-is-not-a-sanctionable-entity-in-the-tornado-cash-case/ https://www.coincenter.org/analysis-what-is-and-what-is-not-... One indication that its action stands on weak legal footing is that it had to mischaracterize the autonomous protocol as part of an entity that includes the Tornado Cash developers and DAO in its press release, just to rationalize the designation. The protocol, being immutable, is outside the control of any party, including the open source developers who wrote its code, so is obviously not a part of any such entity.

Yizahi 4y ago

- "And what are you gonna do to us? Force operations to the offshore? Force us to use shady offshore bank? Not allow USD to USDT pairs?" (c) Giancarlo, laughing probably, sitting on a billions of mafia cash.