In a move to combat illicit financial activities, Tether, the leading stablecoin issuer, has frozen approximately $344 million worth of USDT tokens residing in two wallets on the Tron blockchain. This action was taken in response to requests from US authorities, who had flagged these addresses due to their alleged involvement in illicit activities. As a result, further movement of these funds has been prevented. The nature of the illicit activities and the controllers of the wallets were not disclosed by the company.
However, according to blockchain analytics firm AMLbot, the addresses in question appeared in documents and posts related to scams. This development comes at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under scrutiny.
The Financial Action Task Force has recently warned about the increasing use of stablecoins for illicit transactions, including the evasion of sanctions and money laundering. Public blockchains allow for the tracing of transactions, and under certain conditions, issuers have the ability to freeze assets. This issue gained attention earlier this month following the $285 million exploit of Drift Protocol, where attackers moved large amounts of USDC stablecoin and bridged funds across different chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly 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 relevant authorities. Tether has 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.
Additionally, the company is expanding its presence in the US market with the launch of the USAT token, which complies with federal stablecoin regulations. This effort is in partnership with Anchorage Digital, a federally regulated crypto bank, and is led by former White House crypto advisor Bo Hines.
Tether is also preparing for its first full audit of reserves, a step aimed at enhancing transparency and aligning with stricter regulatory expectations for stablecoins.