Tether, the issuer USDT, the largest stablecoin in the world, has yet to block addresses associated with Tornado Cash’s privacy protocol Tornado Cash.
USDT holders still have the ability to technically use smart contracts to hide their funds. It is not clear if Tether’s permissiveness constitutes a violation U.S. sanctions.
Tornado and Tether
Tether released a statement on Wednesday stating that the Office of Foreign Assets Control has no expectation that stablecoin issuers will freeze secondary market addresses owned by sanctioned entities.
Tether stated that it would freeze a private address of its wallet (not exchanges/services) upon being asked by a law enforcement agent. Despite Tether’s close-knit contact with relevant entities, no such request has been made of Tether regarding Tornado Cash.
Tether stated that it would not be prudent to place a unilateral ban on secondary market addresses until it has received such a request.
The company stated that even if Tether suspects that there are suspicious activities at such an address, freezing without the verification of law enforcement or other government agencies could interfere with ongoing sophisticated law enforcement investigations.
Tether pointed out that in some cases, law enforcement has specifically instructed it not to freeze criminal addresses. This could make suspects aware of the investigation, trigger liquidations and jeopardize future communications.
Tether stated that it does not consider US citizens to be its customer and has never taken on US residents as customers. Paulo Arduino, chief technology officer at Tether, stated that Tether does not consider OFAC Sanctions to be part of its high-quality compliance program.
According to Washington Post, the Treasury Department has declined to comment on whether Tether is in violation of Tornado Cash sanctions.
What did other stablecoins do?
Circle, the USC issuer, reluctantly but quickly agreed to sanctions against Tornado Cash when they were made public earlier in the month. Jeremy Allaire, chief executive officer, stated that the company was required by Bank Secrecy (BSA) requirements and that “nearly every responsible registered Virtual Asset Service Providers would follow suit.”
This is true for many services within the Ethereum ecosystem (ex. While this is true for many services in the Ethereum ecosystem (ex. Paxos, the issuer USDP and BUSD, as well as MakerDAO the issuer DAI (algorithmic stablecoin DAI), are just a few of these.
MakerDAO’s cofounder actually suggested that the stablecoin’s USDC reserves be converted into ETH to avoid OFAC capture.
CryptoPotato’s first article, Tether has not sanctioned Tornado Cash transfers, unlike USDC, appeared first on CryptoPotato.
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