• Tether says the US treasury had failed to indicate that stablecoin issuers were expected to freeze secondary market public addresses published on the OFAC SDN list despite sanctioning Tornado Cash.
• While some crypto firms such as USDC stablecoin issuer Circle FTX  and some crypto firms have moved on with blacklisting Tornado Cash addresses, some like BUSD maker Paxos and DAI have decided to hold back.

Tether Limited Inc, the firm behind the USDT stablecoin has pushed back against pressure to freeze addresses associated with Tornado Cash citing the lack of clear guidelines by the US treasury and the absence of a “precisely detailed” request to do so by the US law enforcement agencies.

In a Wednesday statement on its website, the firm noted that the US treasury had failed to indicate that stablecoin issuers were expected to freeze secondary market public addresses published on the OFAC SDN list despite sanctioning Tornado Cash. Furthermore, it was yet to receive an official request to freeze the said addresses from any US law enforcement agency despite its “near-daily contact with US law enforcement.”

Although Tether does consider OFAC Sanctions as part of its world-class compliance program, it stated that it had always adhered to legitimate requests to freeze contract addresses of privately held wallets with an exception to exchanges. 

“Unilaterally freezing secondary market addresses could be a highly disruptive and reckless move by Tether,” Tether said, stressing that even if it recognizes suspicious activities on such addresses, it could not complete a freeze without verified instructions from a law enforcement agency as that would jeopardize investigations.

Earlier this month, the US Treasury sanctioned Tornado Cash and banned US citizens from dealing in it after the Ethereum-based crypto mixer was accused of helping launder roughly $7 billion in crypto. In the wake of the ban, the protocol’s Github page and emails were taken down with the arrest of a suspected developer of the protocol in the Netherlands sparking widespread outrage. Software developers termed the sanction and the subsequent arrest as an attack on their freedom of speech which is expressed through code, with the situation catching the attention of some congress members.

However, while some crypto firms such as USDC stablecoin issuer Circle FTX  and some crypto firms have moved on with blacklisting Tornado Cash addresses, some like BUSD maker Paxos and DAI have decided to take a back seat until there is further regulatory clarity.

According to Tether, “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” if it was made unilaterally.