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 addresses were flagged for suspected links to illicit activities, effectively preventing any further movement of the funds. The nature of the activities and the controllers of the wallets were not specified by the company. However, according to blockchain analytics firm AMLbot, the addresses appeared in documents and posts related to scams.
This move comes as the debate surrounding the role of stablecoin issuers in stopping funds linked to illegal transactions is gaining attention again. The Financial Action Task Force recently warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering. While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under certain conditions.
The issue gained prominence earlier this month following the $285 million exploit of Drift Protocol, where attackers moved hundreds of millions of USDC stablecoins 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 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, having launched the USAT token, which complies with federal stablecoin regulations, in partnership with federally regulated crypto bank Anchorage Digital, 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 more closely with regulatory expectations for stablecoins.