Tether, the company behind the world's largest stablecoin, announced on Thursday that it has blocked $344 million worth of USDT tokens in two wallets on the Tron blockchain, acting on requests from US authorities. The decision to freeze these assets was made after the addresses were flagged for alleged connections to illicit activities, thereby preventing any further movement of the funds. The nature of the activity and the controllers of the wallets were not disclosed by the company.
However, according to AMLbot, a blockchain analytics firm, the addresses were linked to scam-related documents and posts. This move 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 warned 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.
The issue gained attention earlier this month after the $285 million exploit of Drift Protocol, where attackers moved 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 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 with the launch of the USAT token, which complies with federal stablecoin regulation, issued in partnership with Anchorage Digital, a federally regulated crypto bank, 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 aimed at improving transparency and aligning with tighter regulatory expectations for stablecoins.