On Thursday, Tether, the company behind the world's largest stablecoin, announced that it has frozen approximately $344 million in USDT tokens across two wallets on the Tron blockchain. This decision was made in response to requests from US authorities, who flagged the addresses due to suspected links to illicit activities.
As a result, further movement of these funds has been prevented. The company has not disclosed the nature of the alleged activity or the identities of those controlling the wallets. However, according to blockchain analytics firm AMLbot, the addresses in question have 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 has recently cautioned 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. This issue has gained attention following the $285 million exploit of Drift Protocol, in which attackers transferred 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. 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 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 in compliance with federal stablecoin regulations. This effort is being led by former White House crypto advisor Bo Hines and is being issued in partnership with federally regulated crypto bank Anchorage Digital. Furthermore, Tether is preparing for a full audit of its reserves for the first time, a long-promised step aimed at improving transparency and aligning with stricter regulatory expectations for stablecoins.