Tether, a leading crypto company and issuer of the world's largest stablecoin, announced on Thursday that it has frozen $344 million worth of USDT tokens in two wallets on the Tron blockchain, in response to requests from US authorities. The freeze was implemented after the addresses were flagged for alleged connections to illicit activity, effectively preventing any further movement of the funds.
The nature of the activity and the identities of the wallet controllers were not disclosed by the company. However, blockchain analytics firm AMLbot reported that the addresses appeared in documents and posts related to scams. This move comes as the debate surrounding the role and responsibility of stablecoin issuers in preventing the transfer of funds linked to illegal activities is once again in the spotlight.
The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering. Public blockchains enable the tracing of transactions, while issuers have the ability to freeze assets under specific conditions. The issue has gained attention this month following the $285 million exploit of Drift Protocol, in which 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 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. The company is also expanding its presence in the US market, having launched the USAT token, which is compliant with federal stablecoin regulation, in partnership with federally regulated crypto bank Anchorage Digital.
This 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 long-promised step towards improving transparency and aligning with stricter regulatory expectations for stablecoins.