Tether Refuses To Freeze Sanctioned Tornado Cash Addresses

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USD-backed stablecoin issuer Tether (USDT) has released a statement that it would not be freezing all Tornado Cash addresses that the U.S. Treasury has sanctioned. 

Tornado Cash Sanctions  

On Wednesday, Tether released a statement expressing that it will not freeze smart contract addresses sanctioned by the United States government. The statement also clarified the reasons behind the firm’s decision to do so. The decision is in relation to the crypto trail mixing tool Tornado Cash, which has recently been sanctioned by the Treasury Department’s subdivision, Office of Foreign Assets Control (OFAC). The Tornado Cash app was included in the OFAC’s Specially Designated Nationals and Blocked Persons (SDN) list for its role in the money laundering of over $7 billion of stolen crypto funds, as revealed by the Treasury. 

Freezing Accounts Could Alert Miscreants

Explaining its decision not to freeze such accounts, Tether stated, 

”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 has also addressed that freezing sanctioned wallets or smart contract addresses without the explicit orders of law enforcement agencies could disrupt ongoing investigations, as it might alert the wallet holders and hamper evidence gathering. 

Decisions By Other Stablecoins

Under the sanctions imposed on Tornado Cash, all U.S. citizens and entities are prohibited from interacting with addresses and smart contracts associated with the mixer tool. However, Tether is a Hong Kong-based entity. Neither does it conduct business in the U.S. nor accept U.S. citizens as customers. Therefore its decision to follow certain U.S. regulations is purely voluntary compliance and is not obligated to freeze the sanctioned accounts. 

The firm has also pointed out that other stablecoin issuers like Paxos (USDP) and MakerDAO (DAI) have also not frozen sanctioned wallets. 

Tether’s statement also expresses its concerns over the USD coin issuer Circle freezing the accounts. 

“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.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.


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