Tether Decides against Freezing Tornado Cash Addresses while Awaiting instructions from Law Enforcement
- Tether announced they will not freeze Tornado Cash addresses right away
- Tether will comply with the freeze when they receive a legitimate request from an authorized law enforcement agent
- As of now, OFAC did not indicate that an issuer of a stablecoin can freeze secondary market addresses
In 2014, Tether tokens (USDT) introduced the stablecoin model. They offer the simplicity and stability of fiat currencies enhanced coupled with the innovation brought by blockchain technology.
In the last few weeks, Tornado Cash - a popular crypto mixer that can hide the transfer history of funds - has been blacklisted and sanctioned by many authorities.
The sanctions have led several crypto brands to blacklist wallets associated with the service.
However, there has not been any official call from the authorities for brands to do this.
Tether may be in violation of the new sanctions as they are reportedly not blacklisting accounts associated with Tornado cash.
Freezing secondary market addresses on a unilateral basis could result in a major disruptive action by Tether. Even if they recognize dubious activities on such a particular address, freezing without the authorized instruction of government agencies and law enforcement might interfere with ongoing investigations.
As per their announcement, the US officials or law enforcement did not contact them, requesting to freeze the addresses which were already sanctioned by OFAC. However, as mentioned above, Tether usually complies with requests from US authorities almost on a daily basis.
Tether officials firmly believe that, without permission from the authorities, the $USDC’s move to blacklist Tornado Cash smart contracts was untimely with a solid probability of jeopardizing the work of other law enforcement agencies and regulators around the world.
It is also a fact that $DAI, which is an algorithmic stablecoin accounting to 36% of its reserves in $USDC, which is equivalent to almost $3.4B, also did not fancy the idea of proceeding with any freeze.
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