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, following requests from US authorities. The freeze was implemented after the addresses were flagged for suspected links to illicit activities, according to a blog post by the company, effectively preventing any further movement of the funds. The nature of the activity and the controllers of the wallets were not specified by the company.
However, blockchain analytics firm AMLbot indicated that the addresses appeared in documents and posts related to scams. This move comes amidst renewed debate about the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities. The Financial Action Task Force recently cautioned that stablecoins are increasingly being used for illicit transactions, including evasion of sanctions 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 after the $285 million exploit of Drift Protocol, where attackers transferred hundreds of millions of USDC stablecoins and bridged funds across chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and limit losses, while the company stated 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 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, having launched the USAT token, which complies with federal stablecoin regulations, in partnership with federally regulated crypto bank Anchorage Digital, led by former White House crypto advisor Bo Hines.
Additionally, Tether is preparing for a full audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with tighter regulatory expectations for stablecoins.