On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen $344 million worth of USDT tokens in two wallets on the Tron blockchain, following requests from US authorities. The freeze was implemented after the addresses were flagged for alleged connections to illicit activities, effectively preventing any further movement of the funds. The nature of the activities and the controllers of the wallets were not disclosed by the company. However, according to blockchain analytics firm AMLbot, the addresses appeared in documents and posts related to scams.
This move comes as the debate surrounding the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is once again 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.
While public blockchains allow transactions to be traced, issuers have the ability to freeze assets under certain conditions. The issue gained attention earlier this month after the $285 million exploit of Drift Protocol, where attackers moved 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 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.
Furthermore, the company is expanding its presence in the US market, having launched the USAT token, which is compliant with federal stablecoin regulation, in partnership with federally regulated crypto bank Anchorage Digital. The effort is led by former White House crypto advisor Bo Hines.
Tether is also preparing for a full audit of its reserves for the first time, a long-promised step aimed at enhancing transparency and aligning more closely with regulatory expectations for stablecoins.