On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen approximately $344 million worth of USDT tokens across two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged the addresses for suspected links to illicit activities.
As a result, further movement of these funds was 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 were mentioned in documents and posts related to scams. This development occurs amidst ongoing debates about the role and responsibility of stablecoin issuers in preventing the transfer of funds linked to illegal activities.
The Financial Action Task Force has recently warned that stablecoins are being increasingly 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 specific conditions. This issue has come under scrutiny this month following the $285 million exploit of Drift Protocol, where attackers moved large amounts of USDC stablecoin and bridged funds across chains.
Critics argued that Circle, the issuer of USDC, could have acted more swiftly 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 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. The company is also expanding its presence in the US market with the launch of the USAT token, which complies with federal stablecoin regulations.
This effort is being led by former White House crypto advisor Bo Hines and is being issued in partnership with Anchorage Digital, a federally regulated crypto bank. Furthermore, Tether is preparing for a comprehensive audit of its reserves for the first time, a long-promised step aimed at enhancing transparency and aligning more closely with regulatory expectations regarding stablecoins.