In a recent move, Tether, the prominent issuer of the world's largest stablecoin, has restricted $344 million worth of USDT tokens across two wallets on the Tron blockchain, acting on requests from US authorities. This action was taken after the addresses were flagged for purported connections to illicit activity, as stated in the company's Thursday blog post, effectively preventing any further movement of the funds.
The company refrained from disclosing the nature of the activity or the controllers of the wallets. However, according to AMLbot, a blockchain analytics firm, the addresses were linked to scam-related documents and posts. This development comes at a time when the role of stablecoin issuers in halting funds tied to illegal money transfers is under scrutiny.
The Financial Action Task Force has recently cautioned that stablecoins are increasingly being utilized for illicit transactions, including evasion of sanctions and money laundering. Public blockchains enable transactions to be traced, while issuers have the capability to freeze assets under specific conditions.
This issue gained prominence 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 limit losses, while the company asserted 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 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, led by former White House crypto advisor Bo Hines. Tether is also preparing for a comprehensive audit of its reserves for the first time, a long-promised step aimed at enhancing transparency and aligning more closely with regulatory expectations for stablecoins.