Tether, the company behind the world's most widely used stablecoin, announced on Thursday that it has frozen approximately $344 million in USDT tokens across two wallets on the Tron blockchain, in response to requests from US authorities. The decision to freeze these assets was made after the addresses were flagged for suspected links to illicit activities, effectively preventing any further movement of the funds. The nature of the activity and the identity of the wallet owners 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 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. Public blockchains allow for the tracing of transactions, while 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 transferred hundreds of millions of USDC stablecoin and bridged funds across chains.
Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and minimize losses, while the company stated that it only takes such actions when legally required or at the request of law enforcement and 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, in partnership with Anchorage Digital, a federally regulated crypto bank, with the effort being led by former White House crypto advisor Bo Hines. Furthermore, Tether is preparing for a comprehensive audit of its reserves for the first time, a long-awaited step aimed at enhancing transparency and aligning more closely with regulatory expectations regarding stablecoins.