On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it had frozen approximately $344 million worth of USDT tokens held in two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged these addresses for their alleged involvement in illicit activities. As a result, the transfer of these funds has been blocked.
The nature of the activities and the identities of those controlling the wallets were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, these addresses have been linked to scam-related documents and posts.
This development comes at a time when there is intense debate about the role and responsibility of stablecoin issuers in preventing the movement of funds linked to illegal transactions. Recently, the Financial Action Task Force (FATF) warned that stablecoins are increasingly being used for illicit purposes, including evading sanctions and laundering money.
While public blockchains allow for the tracing of transactions, issuers have the capability to freeze assets under specific conditions. This issue gained prominence earlier this month following the $285 million exploit of Drift Protocol, where attackers moved large amounts of USDC stablecoin and transferred funds across different chains. Critics argued that Circle, the issuer of USDC, should have acted more swiftly to freeze assets and minimize losses. In response, Circle stated that it only takes such actions when legally required or at the request of law enforcement and relevant authorities.
Tether has stated that it collaborates with law enforcement agencies when wallets are associated with sanctions evasion or criminal networks, supporting 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 Anchorage Digital, a federally regulated crypto bank. This effort is led by Bo Hines, a former White House crypto advisor.
Furthermore, Tether is preparing for its first comprehensive audit of its reserves, a step it has long promised to take in order to enhance transparency and align more closely with regulatory expectations regarding stablecoins.