On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it had frozen $344 million worth of USDT tokens in two Tron blockchain wallets, following a request from US authorities. The action was taken after the addresses were flagged for suspected links to illicit activities, effectively preventing any further movement of the funds. The nature of the activities and the controllers of the wallets were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, the addresses appeared in documents and posts related to scams.
This move 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 (FATF) 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. The issue gained attention earlier this month after the $285 million exploit of Drift Protocol, where attackers moved 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 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 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, 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 stricter regulatory expectations for stablecoins.