Tether, the company behind the world's most widely used stablecoin, announced on Thursday that it has frozen approximately $344 million worth of USDT tokens held in two wallets on the Tron blockchain. This move was made 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 occurs amidst ongoing discussions about the role and responsibilities of stablecoin issuers in preventing the transfer of funds linked to illegal activities. Recently, the Financial Action Task Force (FATF) cautioned that stablecoins are increasingly being utilized for illicit transactions, including the evasion of sanctions and money laundering.
While public blockchains enable the tracing of transactions, issuers have the capability to freeze assets under specific conditions. This issue gained prominence earlier this month following the $285 million exploit of Drift Protocol, where 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 mitigate 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 claims to collaborate with law enforcement agencies when wallets are connected to sanctions evasion or criminal networks, having 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. Tether is also preparing for its first comprehensive audit of reserves, a long-promised step aimed at enhancing transparency and aligning with stricter regulatory expectations for stablecoins.