Tether, the prominent issuer of the world's largest stablecoin, announced on Thursday that it has restricted access to $344 million worth of USDT tokens held across two wallets on the Tron blockchain. This decision was made in response to requests from US authorities, who had flagged the addresses due to suspected links to illicit activities.
As a result, the movement of these funds has been halted. The company has not disclosed details regarding the nature of the activities or the identities of those controlling the wallets. However, according to blockchain analytics firm AMLbot, the addresses in question have appeared in documents and posts related to scams.
This move by Tether comes at a time when there is renewed debate about the role and responsibilities of stablecoin issuers in preventing the transfer of funds linked to illegal activities. 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, while issuers have the ability to freeze assets under specific conditions.
The issue of stablecoin regulation gained significant attention earlier this month following the $285 million exploit of Drift Protocol, in which attackers transferred 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 agencies 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 is compliant with federal stablecoin regulations. This effort is being undertaken in partnership with Anchorage Digital, a federally regulated crypto bank, and is led by former White House crypto advisor Bo Hines.
Furthermore, Tether is preparing for a comprehensive audit of its reserves for the first time, a step that has been long-promised as the firm seeks to enhance transparency and align more closely with regulatory expectations surrounding stablecoins.