Tether says it won't freeze sanctioned Tornado Cash addresses unless told to do so by law enforcement

"In our dealings with law enforcement, we are sometimes specifically instructed not to freeze addresses, as this may alert suspects," Tether says.

On Wednesday, U.S. dollar stablecoin issuer Tether (USDT) said it would not freeze smart contract addresses sanctioned by the Office's Specially Designated Nationals and Blocked Persons (SDN) list of Foreign Assets (OFAC) for cryptocurrency track mixer Treasury Tornado. Explaining the decision, Tether said:

"So far, OFAC has not indicated that a stablecoin issuer should freeze secondary market addresses that are published on OFAC's SDN list or that are operated by individuals and entities that have been sanctioned by OFAC.Furthermore, 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 still provide precise details."

Tether pointed out that unilaterally freezing wallet or smart contract addresses could be a "highly disruptive" and "reckless" move. "This could alert suspects to an impending law enforcement investigation, lead to liquidations or abandonment of funds, and compromise the collection of additional evidence," the issuer said.

All US persons and entities are prohibited from interacting with the USDC and Ethereum smart contract addresses of the Digital Currency Mixer on the SDN List, under threat of severe criminal penalties for violations. However, Tether is a Hong Kong-based issuer and does not onboard US persons as customers or conduct business in the US, although it voluntarily follows certain US regulations as part of compliance.

Tether also expressed reservations about USD coin issuer Circle's decision to unilaterally freeze Tornado Cash smart contract addresses earlier this month. "If done without instructions from US authorities, the USDC's decision to blacklist Torn...