On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen approximately $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 alleged connections 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 amidst ongoing debates about the role and responsibility of stablecoin issuers in preventing the transfer of funds linked to illegal activities. Recently, the Financial Action Task Force 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 specific conditions.
The issue gained attention this month after the $285 million exploit of Drift Protocol, where attackers transferred 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 claims to work with law enforcement when wallets are linked to sanctions evasion or criminal networks, having 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, 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 its first full audit of reserves, a long-promised step towards improving transparency and aligning with stricter regulatory expectations for stablecoins.