On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen $344 million worth of USDT tokens in two wallets on the Tron blockchain, 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 identities of the wallet owners were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, the addresses were mentioned in scam-related documents and posts.
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 has recently warned that stablecoins are increasingly being used 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 certain conditions. The issue has gained attention this month following the $285 million exploit of Drift Protocol, in which attackers transferred hundreds of millions of USDC stablecoins and bridged funds across chains.
Critics have argued that Circle, the issuer of USDC, could have acted faster to freeze assets and minimize losses, while the company claims 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 is compliant 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 a full audit of its reserves for the first time, a long-promised step towards improving transparency and meeting regulatory expectations for stablecoins.