In a significant move, Tether, the company behind the world's largest stablecoin, has announced the freezing of $344 million worth of USDT tokens held across two wallets on the Tron blockchain. This action was taken in response to requests from US authorities, who had flagged the addresses for their alleged connections to illicit activities. As a result, the funds in question can no longer be transferred.
The nature of the illicit activity and the identities of the wallet owners have not been disclosed by Tether. However, according to blockchain analytics firm AMLbot, the addresses in question have appeared in documents and posts related to scams. This development comes at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal transactions is under scrutiny. The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit purposes, including the evasion of sanctions and money laundering.
While public blockchains allow for the tracing of transactions, issuers have the ability to freeze assets under specific conditions. The issue of stablecoin regulation gained prominence earlier this month following the $285 million exploit of Drift Protocol, in which attackers transferred hundreds of millions of USDC stablecoins and bridged funds across different blockchain networks. Critics argued that Circle, the issuer of USDC, should have acted more swiftly to freeze the assets and minimize losses. In response, Circle stated that it only takes such actions when legally required or at the request of law enforcement and regulatory authorities.
Tether has stated that it collaborates with law enforcement agencies when wallets are linked to sanctions evasion or criminal networks, and has supported over 2,300 cases globally across 340 agencies in 65 countries. Furthermore, the company is expanding its presence in the US market with the launch of the USAT token, which is compliant with federal stablecoin regulations.
The USAT token is being issued in partnership with Anchorage Digital, a federally regulated crypto bank, with the effort being led by former White House crypto advisor Bo Hines. Additionally, Tether is preparing to conduct a full audit of its reserves for the first time, a step that has been long-promised as the company seeks to enhance transparency and align more closely with regulatory expectations regarding stablecoins.