Cody McGrath 
Stablecoin issuer Tether has said that it will not freeze Tornado Cash accounts that were sanctioned except if it gets a directive from law enforcement to do so.
As of Wednesday, cryptocurrency trail-mixer Tornado Cash’s smart contract addresses that were sanctioned by the Specially Designated Nationals and Blocked Persons (SDN) list maintained by the U.S. Office of Foreign Assets Control (OFAC) Control would not be frozen. Tether gave the following reasons for the choice:
“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 U.S. law enforcement agency or regulator has made such a request despite our near-daily contact with U.S. law enforcement whose requests always provide precise details.”
Tether noted that it might be “extremely disruptive” and “reckless” to arbitrarily freeze wallet or smart contract addresses. The issuer warned that this might put additional evidence-gathering at risk, prompt fund liquidations or abandonments, and notify suspects of an upcoming law enforcement inquiry.
Interaction with the USDC and Ethereum smart contract addresses of the virtual currency mixer listed on the SDN list is forbidden and is subject to severe criminal penalties for anyone who does.
Tether, on the other hand, is a Hong Kong-based issuer that neither accepts Americans as customers nor conducts business there, despite the fact that it voluntarily abides by several U.S. laws as part of compliance.
Tether also highlighted concerns over Circle’s earlier this month unilateral decision to freeze Tornado Cash smart contract addresses.
Tether claims that the USDC’s decision to ban Tornado Cash smart contracts was hastily taken and may have compromised the efforts of other regulators and law enforcement organizations worldwide.
The company notes that other U.S.-based stablecoin issuers, such as Paxos and Dai, chose not to freeze any Tornado Cash wallets. The penalties became effective on August 8.