Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen $344 million worth of USDT tokens in two wallets on the Tron blockchain, following requests from US authorities. The freeze was implemented after the authorities flagged the addresses for alleged links to illicit activity, effectively preventing any further movement of the funds. The nature of the activity and the identities of the wallet controllers were not disclosed by the company.
However, according to blockchain analytics firm AMLbot, the addresses were found in scam-related documents and posts. This move comes as the debate over the role of stablecoin issuers in stopping funds linked to illegal money transfers is back in the spotlight. The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering. Public blockchains allow transactions to be traced, while issuers have the ability to freeze assets under certain conditions.
The issue gained attention this month after the $285 million exploit of Drift Protocol, where 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, while the company stated that it only takes such actions when legally required or at the request of law enforcement and authorities. Tether claims to work with law enforcement when wallets are tied 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, compliant with federal stablecoin regulation, issued in partnership with federally regulated crypto bank Anchorage Digital. This effort is led by former White House crypto advisor Bo Hines.
Tether is also preparing for a full audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with tighter regulatory expectations for stablecoins.