Tether, the company behind the world's largest stablecoin, announced on Thursday that it has restricted $344 million worth of USDT tokens in two wallets on the Tron blockchain, following a request from US authorities. The restriction was implemented after the authorities identified the addresses as being potentially linked to illicit activities, according to a blog post by the company. This move prevented any further movement of the funds.
The company did not provide details about the nature of the activities or the identities of those controlling the wallets. However, blockchain analytics firm AMLbot reported that the addresses were mentioned in scam-related documents and posts. This development comes as the debate surrounding the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is reignited.
The Financial Action Task Force recently warned that stablecoins are increasingly being used for illicit transactions, including the evasion of sanctions and money laundering. Public blockchains allow transactions to be tracked, while issuers have the ability to freeze assets under certain conditions. The issue gained attention earlier this month after the $285 million exploit of Drift Protocol, in which attackers transferred 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 claimed 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 is compliant with federal stablecoin regulations, in partnership with federally regulated crypto bank Anchorage Digital. The effort is 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.