In a move to combat illicit activity, Tether, the prominent issuer of the world's largest stablecoin, has frozen approximately $344 million worth of USDT tokens across two wallets on the Tron blockchain, following requests from US authorities. The action was taken after the addresses were flagged for alleged links to illicit activity, effectively preventing further movement of the funds. The nature of the activity and the controllers of the wallets were not specified by the company.
However, according to blockchain analytics firm AMLbot, the addresses appeared in documents and posts related to scams. This development comes as the debate surrounding the role of stablecoin issuers in stopping funds linked to illegal money transfers is once again under scrutiny.
The Financial Action Task Force (FATF) has recently warned about the increasing use of stablecoins for illicit transactions, including sanctions evasion and money laundering. While public blockchains allow transactions to be traced, issuers like Tether have the ability to freeze assets under certain conditions. The issue of stablecoin regulation and responsibility has been highlighted this month, particularly after the $285 million exploit of Drift Protocol, where attackers moved hundreds of millions of USDC stablecoin and bridged funds across chains.
Critics argued that Circle, the issuer of USDC, could have acted faster to freeze assets and limit losses. In contrast, Tether stated that it works with law enforcement when wallets are tied to sanctions evasion or criminal networks and has supported over 2,300 cases globally across 340 agencies in 65 countries. Additionally, Tether is expanding its presence in the US market with the launch of the USAT token, which is compliant with federal stablecoin regulation and was issued in partnership with federally regulated crypto bank Anchorage Digital. The effort is led by former White House crypto advisor Bo Hines.
Furthermore, Tether is preparing for a full audit of its reserves for the first time, a step aimed at improving transparency and aligning with regulatory expectations for stablecoins.