In a recent move, Tether, the prominent stablecoin issuer, has frozen approximately $344 million worth of USDT tokens across two Tron blockchain wallets. This action was taken in response to requests from US authorities, who had flagged the addresses for their alleged connection to illicit activities. As a result, further movement of these funds has been prevented.
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 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 warned about the growing use of stablecoins for illicit transactions, including sanctions evasion and money laundering. The transparency of public blockchains allows transactions to be traced, while issuers have the ability to freeze assets under certain conditions. This issue has gained attention following the $285 million exploit of Drift Protocol, where attackers transferred 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, 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. 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 federally regulated crypto bank Anchorage Digital. This effort is led by former White House crypto advisor Bo Hines.
Tether is also preparing for a full audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with regulatory expectations for stablecoins.