On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it has frozen approximately $344 million worth of USDT tokens in two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged these addresses for suspected links to illicit activities.
As a result, the funds in question can no longer be transferred. The nature of the activities 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 there is renewed debate about the role of stablecoin issuers in preventing the movement of funds tied to illegal transactions. Recently, the Financial Action Task Force warned that stablecoins are increasingly being used for illicit purposes, including evading sanctions and laundering money. While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under specific conditions.
This issue gained attention earlier this month following the $285 million exploit of Drift Protocol, where attackers transferred large amounts of USDC stablecoin and bridged funds across different chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and minimize losses. In response, the company stated that it only takes such actions when legally required or at the request of law enforcement and relevant 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 with the launch of the USAT token, which complies with federal stablecoin regulations and was issued 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 its first full audit of reserves, a long-promised step towards improving transparency and aligning with regulatory expectations for stablecoins.