On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen approximately $344 million worth of USDT tokens in two wallets on the Tron blockchain, in response to requests from US authorities. The decision to freeze these assets was made after the wallets in question were flagged for suspected links to illicit activities, effectively preventing any further movement of the funds. The nature of the illicit activity 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 move by Tether comes at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under scrutiny. Recently, the Financial Action Task Force (FATF) warned about the increasing use of stablecoins for illicit transactions, 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. The issue gained attention earlier this month following the $285 million exploit of Drift Protocol, where attackers moved large amounts of USDC stablecoin and bridged funds across different chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and mitigate losses, while 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 agencies 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 is compliant with federal stablecoin regulations, in partnership with Anchorage Digital, a federally regulated crypto bank, under the leadership of former White House crypto advisor Bo Hines. Tether is also preparing for its first full audit of reserves, a long-promised step towards enhancing transparency and aligning with stricter regulatory expectations for stablecoins.