Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen approximately $344 million worth of USDT tokens residing in two wallets on the Tron blockchain, following requests from US authorities. The decision to freeze these assets was made after the relevant addresses were flagged for suspected ties to illicit activities, as stated in a blog post by the company. As a result, further movement of these funds has been prevented.
The nature of the activities and the individuals controlling the wallets were not disclosed by the company. However, according to AMLbot, a blockchain analytics firm, the addresses in question appeared in documents and posts related to scams.
This development occurs at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under scrutiny. Recently, the Financial Action Task Force cautioned that stablecoins are increasingly being utilized for illicit transactions, including the evasion of sanctions and money laundering.
While public blockchains enable the tracing of transactions, issuers have the capability 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 multiple chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and minimize losses, while the company stated that it only takes such actions when legally required or at the request of law enforcement and relevant 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 is compliant with federal stablecoin regulations, in partnership with Anchorage Digital, a federally regulated crypto bank, with the effort being led by former White House crypto advisor Bo Hines.
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.