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Major stablecoin network Tether may not be on board with the US Treasury Department’s ban on crypto mixer Tornado Cash. In an official release on Wednesday, the team revealed that they would not blacklist any of the OFAC’s sanctioned smart contract addresses.
Tether in Close Touch with Law Enforcement Agencies
Earlier this month, the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned the privacy protocol Tornado Cash. The treasury highlighted its role in laundering the proceeds of cybercrime as the major reason for the ban. Following this, the platform made it onto the OFAC’s Specially Designated Nationals and Blocked Persons (SDN) list.
Tether explained in its post that it typically works to aid law enforcement agencies worldwide with investigations. According to their release, legitimate requests to freeze privately held accounts usually meet swift compliance on their part.
We are in almost daily contact with key law enforcement officers and pride ourselves on the timeliness with which we respond to their requests,” the post read.
No Orders to Freeze Accounts
The stablecoin issuer claims the OFAC has not sent any instructions to act against secondary market addresses on its SDN list. Additionally, no other US regulator has released a similar request despite Tether’s frequent communication.
Hence, the Tether network will not be freezing any addresses presently. However, this position might also not be wise. The stablecoin network pointed out that independently choosing to do so could in fact be a “highly disruptive and reckless move” from them.
According to the team, this stance stands even if they do spot suspicious activity. They explained without a direct order they could be getting in the way of actual investigations.
Even if Tether recognizes suspicious activities on such an address, completing a freeze without the verified instruction of law enforcement and other government agencies might interfere with ongoing and sophisticated law enforcement investigations.”
Circle’s Decision to Blacklist Tornado Cash Was Premature – Tether
Tether further noted that they sometimes receive instructions not to freeze certain suspect addresses without direct respect. This could interfere with the probe by alerting suspects to its existence. The Tether team expects the usual process of precise communication and will not act outside of this.
The network’s release also highlighted that Tether is not a US-based entity. Tether does not run within the States or “onboard US persons as customers.” However, they consider OFAC bans as part of its global compliance program.
In the release, the network highlighted how other platforms have responded to the sanctions so far. They noted that NY-regulated stablecoin issuer Paxos had not blacklisted accounts with ties to the crypto mixer. Tether acknowledged Circle’s decision to freeze Tornado Cash’s addresses shortly after news of the sanction.
We believe that, if made without instructions from US 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,” they said.