Tether was ready to disregard contentious U.S. restrictions against Tornado Cash.

Tether, a cryptocurrency exchange, plans to flout U.S. sanctions by refusing to freeze relevant Tornado Cash addresses until it receives more guidance from law enforcement.

When it sanctioned Tornado Cash, an Ethereum-based virtual currency mixer, earlier this month amid claims the platform "failed to impose effective controls" to prevent the laundering of proceeds from cybercrime, the Treasury Department's Office of Foreign Assets Control (OFAC) sparked debate. Politicians and business leaders alike have criticized the designation, and on Tuesday, Rep. Tom Emmer (R-Minn.) wrote to Treasury Secretary Janet Yellen to ask for clarification.

Emmer stated in the letter, which he posted on Twitter, "OFAC has a long, commendable history of utilizing financial sanctions to enhance the national security of the United States. Nonetheless, the sanctioning of a neutral, open-source, decentralized technology presents a series of new questions, which impact not only our national security but the right to privacy of every American citizen."

In a news statement on Wednesday, Tether—a stablecoin issuer registered in the British Virgin Islands and Hong Kong under various names—expressed its worries. Even though the company claims it does not do business in the US, as part of its compliance efforts, it abides by OFAC penalties.

According to Tether, "OFAC has not indicated that a stablecoin issuer is expected to freeze secondary market addresses that are published on OFAC’s [Specially Designated Nationals] 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."

"Unilaterally freezing secondary market addresses could be a highly disruptive and reckless move by Tether."

Virtual currency mixers combine various cryptocurrency streams before sending them to their specific destination in order to increase privacy. Regulators in the United States are paying them more attention because they believe mixers are frequently used by criminals for money laundering.

Because of Blender.io's alleged involvement in a sizable virtual currency robbery by the Lazarus Outfit, a North Korean state-sponsored hacking group, the Treasury Department issued first-of-their-kind sanctions against the company in May. Similar to how it sanctioned Tornado Cash, OFAC noted the Lazarus Group's illegal conduct.

Due to the categorization, all transactions involving Tornado Cash's property or interests in property by U.S. citizens or residents are forbidden unless they are covered by a general or specific license given by OFAC.

The creator of the USD Coin (USDC) stablecoin, Circle, indicated it would freeze accounts in accordance with the designation while certain cryptocurrency platforms, like as Tether, are delaying their compliance with the Tornado Cash regulations.

"We believe that, if made without instructions from U.S. 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," added Tether. 

By fLEXI tEAM