On Thursday, Tether, the company behind the world's largest stablecoin, announced that it has frozen $344 million worth of USDT tokens across two wallets on the Tron blockchain, following a request from US authorities. The freeze was implemented after the addresses were flagged for alleged ties to illicit activity, effectively preventing any further movement of the funds. The nature of the activity and the individuals controlling the wallets were not disclosed by the company. However, according to blockchain analytics firm AMLbot, the addresses appeared in scam-related documents and posts.
This move comes as the debate surrounding the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is once again under scrutiny. The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering. Public blockchains enable the tracing of transactions, while issuers have the ability to freeze assets under certain conditions. This issue gained attention earlier this month after the $285 million exploit of Drift Protocol, in which attackers moved hundreds of millions of USDC stablecoin 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 claimed 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 regulation, in partnership with federally regulated crypto bank Anchorage Digital.
This 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 aimed at enhancing transparency and aligning more closely with regulatory expectations for stablecoins.