On Thursday, Tether, the company behind the world's largest stablecoin, announced that it has frozen approximately $344 million worth of USDT tokens in two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged the addresses for their alleged connection to illicit activities.
As a result, further movement of these funds has been prevented. The nature of the activities and the individuals controlling the wallets were not disclosed by the company.
However, according to AMLbot, a blockchain analytics firm, the addresses were linked to scam-related documents and posts. This development comes at a time when the role of stablecoin issuers in preventing the transfer of funds tied to illegal activities is under scrutiny.
The Financial Action Task Force has recently warned about the increasing use of stablecoins for illicit transactions, including sanctions evasion and money laundering. While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under certain conditions. This issue gained attention earlier this month following the $285 million exploit of Drift Protocol, where 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 minimize losses.
In response, 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. This effort is being led by former White House crypto advisor Bo Hines, in partnership with federally regulated crypto bank Anchorage Digital. Additionally, Tether is preparing for a full audit of its reserves for the first time, a long-awaited step towards improving transparency and aligning with regulatory expectations for stablecoins.