On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it had frozen approximately $344 million in USDT tokens held across two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged the addresses for their alleged connection to illicit activities. As a result, the funds in question can no longer be transferred.
The nature of the activities and the identities of the wallet owners were not disclosed by the company. According to AMLbot, a blockchain analytics firm, the addresses in question appeared in documents and posts related to scams.
This development comes at a time when the role of stablecoin issuers in preventing the flow of funds linked to illegal transactions is under scrutiny. Recently, the Financial Action Task Force warned about the increasing use of stablecoins for illicit purposes, including evading sanctions and laundering money. Public blockchains allow for the tracing of transactions, while issuers have the ability to freeze assets under specific conditions.
This issue gained attention earlier this month after the Drift Protocol was exploited for $285 million, with attackers moving large amounts of USDC stablecoin and bridging funds across different chains. Critics argued that Circle, the issuer of USDC, could have acted more quickly to freeze assets and minimize losses, while the company maintained that it only takes such actions when legally required or at the request of law enforcement and relevant 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 regulations and was issued in partnership with Anchorage Digital, a federally regulated crypto bank.
This effort is 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-promised step aimed at enhancing transparency and aligning more closely with regulatory expectations regarding stablecoins.