On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen $344 million worth of USDT tokens in two Tron blockchain wallets. This move was made in response to requests from US authorities, who had flagged the addresses for their alleged connections to illicit activities.
As a result, the funds can no longer be transferred. 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 linked to scam-related documents and posts. This development comes as the debate surrounding the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is gaining attention.
The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit transactions, including evading sanctions and money laundering. While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under specific conditions.
This issue was highlighted earlier this month when Drift Protocol was exploited for $285 million, resulting in the movement of hundreds of millions of USDC stablecoin across chains. Critics argued that Circle, the issuer of USDC, could have acted faster to freeze assets and minimize 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 linked to sanctions evasion or criminal networks, having 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 is compliant with federal stablecoin regulations. This effort is being led by former White House crypto advisor Bo Hines and is a result of a 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 towards improving transparency and meeting regulatory expectations for stablecoins.