On Thursday, Tether, the company behind the world's most widely-used stablecoin, announced that it has frozen approximately $344 million worth of USDT tokens across two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged the addresses for suspected connections to illicit activities. As a result, the transfer of these funds has been prevented.
The nature of the alleged activities and the identities of those controlling the wallets were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, the addresses in question appeared in documents and posts related to scams. This development comes at a time when the role of stablecoin issuers in preventing the movement of funds linked to illegal transactions is under scrutiny.
The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit purposes, including the evasion of sanctions and money laundering. While public blockchains allow for the tracing of transactions, issuers have the ability to freeze assets under specific conditions. This issue gained attention earlier this month following the $285 million exploit of Drift Protocol, in which attackers transferred large amounts of USDC stablecoin and bridged funds across multiple chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and minimize losses.
In response, the company stated that it only takes such actions when legally required or at the request of law enforcement and relevant 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.
The company is also expanding its presence in the US market with the launch of the USAT token, which is compliant with federal stablecoin regulations. This effort is being led by former White House crypto advisor Bo Hines and is the result of a partnership with federally regulated crypto bank Anchorage Digital. Furthermore, Tether is preparing for a comprehensive audit of its reserves for the first time, a step that has been long-promised as the firm seeks to enhance transparency and align more closely with regulatory expectations regarding stablecoins.