On Thursday, Tether, the company behind the world's largest stablecoin, announced that it has frozen approximately $344 million worth of USDT tokens across two wallets on the Tron blockchain, in response to requests from US authorities. The freeze was implemented after the addresses were flagged 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 AMLbot, a blockchain analytics firm, the addresses appeared in documents and posts related to scams.
This move comes as the debate surrounding the role of stablecoin issuers in stopping funds linked to illegal money transfers is once again under scrutiny. Recently, the Financial Action Task Force warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering. Public blockchains allow transactions to be traced, while issuers have the ability to freeze assets under specific conditions.
This 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 faster to freeze assets and limit losses, while the company claimed 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 tied 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, having launched the USAT token, which complies with federal stablecoin regulation, in partnership with Anchorage Digital, a federally regulated crypto bank, with the effort 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.