On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it had frozen approximately $344 million worth of USDT tokens held in two wallets on the Tron blockchain. This move was made in response to a request from US authorities, who had flagged these addresses for their alleged involvement in illicit activities. As a result, any further movement of these funds has been prevented.
The nature of the activities and the identities of the wallet holders were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, these addresses were linked to scam-related documents and posts. 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.
Recently, the Financial Action Task Force warned about the increasing use of stablecoins for illicit transactions, including money laundering and sanctions evasion. The transparency of public blockchains allows for the tracing of transactions, and under certain conditions, issuers have the ability to freeze assets.
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, while the company stated that it only takes such actions when legally required or at the request of law enforcement and relevant authorities. Tether stated that it collaborates with law enforcement agencies when wallets are linked to sanctions evasion or criminal networks and has supported over 2,300 cases globally across 340 agencies in 65 countries.
Additionally, the company is expanding its presence in the US market with the launch of the USAT token, which complies with federal stablecoin regulations, in partnership with Anchorage Digital, a federally regulated crypto bank, led by former White House crypto advisor Bo Hines. Tether is also preparing for its first comprehensive audit of reserves, a long-promised step towards enhancing transparency and aligning with stricter regulatory expectations for stablecoins.