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 action was taken in response to requests from US authorities, who had flagged the addresses due to suspected links to illicit activities. As a result, further movement of these funds has been prevented.
The nature of the activities and the identities of the wallet owners were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, 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 that stablecoins are increasingly being used for illicit transactions, including money laundering and sanctions evasion. While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under certain conditions.
This issue has gained attention following the $285 million exploit of Drift Protocol, where attackers moved large amounts of USDC stablecoin 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, having launched the USAT token in compliance with federal stablecoin regulations, in partnership with Anchorage Digital, a federally regulated crypto bank. This effort is led by former White House crypto advisor Bo Hines.
Furthermore, Tether is preparing for a full audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with tighter regulatory expectations for stablecoins.