In a significant move, Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen approximately $344 million worth of USDT tokens residing in two wallets on the Tron blockchain. This action was taken in response to requests from US authorities, who had flagged these addresses due to suspected links to illicit activities. As a result, further movement of these funds has been prevented.
The nature of the activities and the identities of those controlling the wallets were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, these addresses were found in documents and posts related to scams.
This development 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 cautioned that stablecoins are increasingly being utilized 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 after the $285 million exploit of Drift Protocol, where attackers transferred hundreds of millions of USDC stablecoins and bridged funds across different chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and minimize losses. In response, the company stated that it only takes such actions when legally required or at the request of law enforcement and relevant authorities. Tether emphasized its collaboration with law enforcement agencies when wallets are linked to sanctions evasion or criminal networks, stating that it 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 complies with federal stablecoin regulations, in partnership with Anchorage Digital, a federally regulated crypto bank. This effort is led by Bo Hines, a former White House crypto advisor.
Furthermore, Tether is preparing for its first full audit of reserves, a long-promised step aimed at enhancing transparency and aligning with stricter regulatory expectations for stablecoins.