Tether Refuses to Freeze Tornado Cash Addresses Despite Sanctions

Earlier this month, the U.S. Treasury announced that it will be completely banning the use of crypto mixer Tornado Cash citing its use for activities of money laundering and other illegal activities.

Three weeks later, USDT stablecoin issuer Tether had yet to freeze addresses having links to Tornado Cash. Explaining the reason behind this, Tether said that the law enforcement agencies have told them specifically to freeze any such accounts.

Tether said that it interacts with law enforcement worldwide and they haven’t received any such request over the past few weeks. In its official blog post, Tether noted: “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”.

Furthermore, the USDT issuer said that unilaterally freezing such smart contract or wallet addresses could be a disruptive and reckless move. Furthermore, doing so without any specific request from law enforcement agencies could hinder their investigation, says Tether.

Tether’s arch rival Circle - the issuer of USDC stablecoin - was quick to block all addresses of Tornado Cash following the sanction by the U.S. Treasury. But Tether hasn’t given any such reactions so far. However, they said that they would consider taking the action to freeze in cash of any such specific requirement from the law enforcement.

However, another report from blockchain analytics and research firm Elliptic, they found that Tornado Cash was the preferred tool for moving funds obtained through the illicit proceeds of the non-fungible tokens (NFTs) scams.

In its research report released Wednesday, August 24, Elliptic noted that Tornado Cash “was the source of $137.6 million of cryptoassets processed by NFT marketplaces and the laundering tool of choice for 52% of NFT scam proceeds before being sanctioned”.

The purpose behind creating Tornado Cash was to provide greater privacy for its users. The crypto mixer spins the funds thereby making it difficult to take the source. However, its working hasn’t gone well with the regulators.