Further reading | Financial Times

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It seems that Tether has entered right into a stand-off with the US authorities’s Office of Foreign Assets Control, or Ofac.

As our banking-industry readers will know, Ofac is a part of the US Treasury Department, and never the kind of regulator with whom you wish to get right into a disagreement.

Still, Tether published a statement Wednesday that mentioned it hasn’t frozen secondary-market wallets tied to Tornado Cash, a “virtual-currency mixer” that OFAC’ed around and found out. The Tornado currency mixer is a privateness device; money on the blockchain has a public path of transactions, and Tornado Cash in impact scrambles the path of any specific token of cryptocurrency. So it’s simple to see why these mixers could be a pretty venue for money laundering.

Ofac said earlier this month that Tornado has been used to launder round $7bn, and put it on the US authorities’s checklist of Specially Designated Nationals and Blocked Persons (SDN) List. For context, one other title on the checklist (helpfully sorted by country here) is Vladimir Putin.

This is the reasoning Tether gives for its choice to not freeze Tornado-Cash-linked addresses:

So far, Ofac has not indicated {that a} stablecoin issuer is anticipated to freeze secondary market addresses which can be printed on OFAC’s SDN List or which can be operated by individuals and entities which have been sanctioned by Ofac. Further, no US legislation enforcement company or regulator has made such a request regardless of our close to day by day contact with US legislation enforcement whose requests all the time present exact particulars.

The logic behind that is complicated to us. Unless we’ve misunderstood one thing, they look like arguing that as a result of they haven’t been contacted particularly by Ofac about its SDN List, they don’t want to dam the addresses that seem on it.

We don’t get the impression that Ofac is the kind of regulator who calls and asks properly when it desires one thing executed. The US Treasury Department is the company that took down Al Capone. The US’s world sanctions regime was described by Adam Tooze (in a blurb of the latest book about sanctions from Nicholas Mulder) as “neoliberalism’s ultimate weapon.”

In any occasion, Tether provides that it “is not a US person, does not operate in the United States or onboard US persons as customers. However, Tether does consider Ofac Sanctions as part of its world-class compliance program.”

With a ~$68bn stablecoin that’s explicitly pegged to the US greenback — the first device of US sanctions — we actually hope it considers them!

Elsewhere on Thursday . . .

Crypto vs sports betting (Stephen Diehl)

— “These arguments have nothing to do with how much you care about unemployment, or how much you care about the unemployment of disadvantaged groups,” [Summers] continued. “They only have to do with technical judgment.” (NYTimes $)

— Construction doesn’t scale. (Brian Potter)

— A few puzzling charts from former Alphavillain Matt Klein.

— Sam Trabucco is leaving Alameda Research (Twitter)

— Biden broadcasts student-loan debt relief of $10,000 per borrower, as much as $20,000 for Pell Grant recipients. The US suspended student-loan funds in the course of the pandemic and received’t begin requiring them till the top of this 12 months. (NY Times $)

— An extended learn from WSJ about “Jerome Powell’s dilemma” forward of his Jackson Hole feedback on Friday. The dilemma is avoiding a recession whereas being seen to manage inflation, regardless that some components driving world inflation are out of the Fed’s management. (WSJ $)

— The Texas authorities says BlackRock is boycotting power corporations. In order to maintain contracts with the state’s pension funds sooner or later, the asset supervisor might want to embody a press release saying it doesn’t boycott power corporations. (FT)





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