On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it had frozen $344 million worth of USDT tokens in two Tron blockchain wallets. The move was made in response to requests from US authorities, who had flagged the addresses for suspected links to illicit activities. As a result, the funds are now unable to be transferred. The nature of the activities and the identities of the wallet owners were not disclosed by Tether.
However, according to AMLbot, a blockchain analytics firm, the addresses appeared in documents and posts related to scams. The decision to freeze the assets 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 cautioned that stablecoins are increasingly being used for illicit transactions, including the evasion of sanctions and money laundering.
While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under certain conditions. This issue has gained attention this month, following the $285 million exploit of Drift Protocol, in which attackers transferred hundreds of millions of USDC stablecoins 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 claims to work 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 complies with federal stablecoin regulations, in partnership with Anchorage Digital, a federally regulated crypto bank. This effort is being 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 that has been long-promised as the firm seeks to improve transparency and align more closely with regulatory expectations surrounding stablecoins.