Tether won’t freeze Tornado Cash addresses, despite US sanctions

Following the US government banning the Ethereum mixing platform Tornado Cash, the stablecoin issuer Tether Holdings Ltd. revealed on August 24 that the company would not “freeze Tornado Cash addresses.” The recent blog post about the subject says Tether is waiting for instructions from law enforcement. The stablecoin issuer has yet to receive a request but hinted it would comply if it did.

According to the Washington Post, Tether, the world’s largest stablecoin issuer, may not be complying with the US Treasury Department’s sanctions against crypto transaction privacy mixer Tornado Cash.

Citing an analysis of data from crypto intelligence firm Dune Analytics, the publication states that the Hong Kong-based Tether has not blacklisted any accounts associated with Tornado Cash.

Paolo Ardoino, Tether’s CTO, told the publication that Tether has yet to be approached by US officials or law enforcement with a request to freeze transactions with Tornado Cash.

Tether “normally complies with requests from US authorities” and considers US Treasury Department sanctions “as part of its world-class compliance program,” he added.

“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 US law enforcement agency or regulator has made such a request despite our near daily contact with US law enforcement whose requests always provide precise details,” Tether said in a statement.

On August 8, the US Treasury Department announced sanctions against Tornado Cash, stating that had taken the measures because criminals had used the privacy mixer “to launder more than $7 billion worth of virtual currency since its creation in 2019.”

However, many in the US and beyond have opposed the sanctions. Digital rights activist group the Electronic Frontier Foundation (EFF) said it was “deeply concerned,” while crypto policy non-profit Coin Center said it was “exploring a court challenge.” CEO of crypto exchange Kraken, Jesse Powell, also joined the chorus of voices calling the sanctions “unconstitutional.”

Interestingly, the market cap for USDC has declined by some $2 billion. The USDC decline has been noted by various cryptocurrency market participants on social media, with a correlation being drawn between the decline of the USDC market cap and the increase in the capitalization of USDT.

One user on Twitter suggested that users transferred around $1.6 billion worth of USDC to USDT following the Tornado Cash sanctions.

Paolo Ardoino also noted the “flipping” of USDC-USDT on Twitter. Both USDC and USDT have the ability to freeze funds through Ethereum smart contract functionality – yet USDC was the only issuer to announce asset freezes on the blacklisted addresses.