Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen approximately $344 million worth of USDT tokens across two wallets on the Tron blockchain, in response to requests from US authorities. The decision to freeze the funds was made after the authorities flagged the addresses for alleged connections to illicit activity, thereby preventing any further movement of the funds.
The company has not disclosed the nature of the activity or the identities of those controlling the wallets. However, according to blockchain analytics firm AMLbot, the addresses have been linked to 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.
Recently, the Financial Action Task Force warned that stablecoins are increasingly being used for illicit transactions, including the evasion of sanctions and money laundering. While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under specific conditions. The issue has been highlighted this month following the $285 million exploit of Drift Protocol, in which attackers transferred hundreds of millions of USDC stablecoin and bridged funds across chains.
Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and minimize 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.
Furthermore, the company is expanding its presence in the US market with the launch of the USAT token, which complies with federal stablecoin regulations and was issued in partnership with federally regulated crypto bank Anchorage Digital, led by former White House crypto advisor Bo Hines. Tether is also preparing for a comprehensive audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with stricter regulatory expectations for stablecoins.