On Thursday, Tether announced that it has frozen approximately $344 million worth of USDT tokens, which were distributed across two wallets on the Tron blockchain. This action was taken in response to requests from US authorities, who had flagged the addresses due to alleged connections to illicit activities. As a result, further movement of these funds has been prevented. The nature of the activity and the identities of the wallet owners were not disclosed by the company.
However, according to AMLbot, a blockchain analytics firm, the addresses in question appeared in documents and posts related to scams. This development comes at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under scrutiny.
The Financial Action Task Force has recently cautioned that stablecoins are increasingly being used for illicit transactions, including the evasion of sanctions and money laundering. While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under specific conditions. The issue gained attention earlier this month following the $285 million exploit of Drift Protocol, in which attackers transferred large amounts of USDC stablecoin and bridged funds across chains.
Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and limit losses, while the company stated that it only takes such actions when legally required or at the request of law enforcement and authorities. Tether has stated that it collaborates with law enforcement when wallets are linked to sanctions evasion or criminal networks, and has supported over 2,300 cases globally across 340 agencies in 65 countries. Furthermore, the company is expanding its presence in the US market, having launched the USAT token, which is compliant with federal stablecoin regulation, in partnership with Anchorage Digital, a federally regulated crypto bank. This effort is being led by former White House crypto advisor Bo Hines.
Additionally, Tether is preparing for a full audit of its reserves for the first time, a long-promised step aimed at improving transparency and aligning more closely with regulatory expectations regarding stablecoins.