On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it has frozen approximately $344 million worth of USDT tokens held across two wallets on the Tron blockchain, in response to requests from US authorities. The decision to freeze these assets was made after the authorities flagged the wallets for their alleged connection to illicit activities, as stated in a blog post by the company.
As a result, any further movement of these funds has been prevented. The nature of the activities and the identities 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 being debated.
The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit transactions, including evading sanctions and laundering money. Public blockchains allow for the tracing of transactions, while issuers have the ability to freeze assets under certain conditions.
This issue gained attention earlier this month after the Drift Protocol was exploited for $285 million, with the attackers moving large amounts of USDC stablecoin and bridging funds across chains. Critics argued that Circle, the issuer of USDC, could have acted faster 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 claims to collaborate 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, led by former White House crypto advisor Bo Hines.
Furthermore, Tether is preparing for a full audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with stricter regulatory expectations for stablecoins.