On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen $344 million worth of USDT tokens in two Tron blockchain wallets. This 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 moved. 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 were linked to scam-related documents and posts.
This development comes as 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 that stablecoins are increasingly being used for illicit transactions, including the evasion of sanctions and money laundering. Public blockchains allow transactions to be traced, while issuers have the ability to freeze assets under certain conditions.
This issue has been highlighted by the recent $285 million exploit of Drift Protocol, in which 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. 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 with the launch of the USAT token, which is compliant with federal stablecoin regulation. This effort is being led by former White House crypto advisor Bo Hines and is a partnership with federally regulated crypto bank Anchorage Digital. 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.