In a move to comply with US law enforcement requests, Tether, the company behind the world's largest stablecoin, has restricted access to $344 million worth of USDT tokens held in two wallets on the Tron blockchain. The action was taken after the authorities flagged the addresses for suspected links to illicit activities, effectively preventing any further movement of the funds.
The nature of the activity and the controllers of the wallets were not disclosed by the company. However, according to blockchain analytics firm AMLbot, the addresses were found 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. Recently, the Financial Action Task Force warned about the increasing use of stablecoins in 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 gained attention earlier this month following the $285 million exploit of Drift Protocol, where 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 limit losses, while the company stated that 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. 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 federally regulated crypto bank Anchorage Digital, led by former White House crypto advisor Bo Hines.
Additionally, Tether is preparing for a full audit of its reserves for the first time, a step aimed at improving transparency and aligning with tighter regulatory expectations for stablecoins.