Tether (USDT), a USD-backed stablecoin issuer, has stated that it will not freeze all Tornado Cash addresses sanctioned by the US Treasury.
Tether stated on Wednesday that it would not freeze smart contract addresses sanctioned by the US government. The statement also explains why the company made the decision. The decision is about Tornado Cash, a cryptocurrency trail-mixing tool recently sanctioned by the Treasury Department’s subdivision, the Office of Foreign Assets Control (OFAC).
Tether Holds Firm on Decision Not To Freeze Tornado Cash Addresses, Awaits Law Enforcement Instruction https://t.co/zpsI9lKLlf
— Tether (@Tether_to) August 24, 2022
According to the Treasury, the Tornado Cash app was added to the OFAC’s Specially Designated Nationals and Blocked Persons (SDN) list for its role in the money laundering of over $7 billion in stolen crypto funds.
Tether explained its decision not to freeze such accounts:
”So far, OFAC has not indicated that a stablecoin issuer is expected to freeze secondary market addresses that are published on OFAC’s SDN List or that are operated by persons and entities that have been sanctioned by OFAC. Further, no U.S. law enforcement agency or regulator has made such a request despite our near-daily contact with U.S. law enforcement whose requests always provide precise details.”
The statement also addressed the possibility that freezing sanctioned wallets or smart contract addresses without the explicit orders of law enforcement agencies could disrupt ongoing investigations by alerting wallet holders and hampering evidence gathering.
All U.S. citizens and entities are prohibited from interacting with addresses and smart contracts associated with the Tornado Cash sanctions. Tether, on the other hand, is a Hong Kong-based company. It neither conducts business nor accepts customers from the United States. As a result, its decision to comply with certain US regulations is purely voluntary, and it is not required to freeze the sanctioned accounts.
Other stablecoin issuers, such as Paxos (USDP) and MakerDAO (DAI), have not frozen sanctioned wallets, according to the firm.
“If made without instructions from U.S. authorities, the move by USDC to blacklist Tornado Cash smart contracts was premature and might have jeopardized the work of other regulators and law enforcement agencies around the world.”
Tether’s statement also expresses concern about frozen accounts by USD coin issuer Circle.
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