On Thursday, Tether, the company behind the world's largest stablecoin, announced that it has 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 authorities identified the addresses as being linked to alleged illicit activity, thereby preventing any further movement of the funds.
The company did not disclose the nature of the activity or the identities of those controlling the wallets. According to blockchain analytics firm AMLbot, the addresses were mentioned in scam-related documents and posts.
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 warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering. Public blockchains enable transactions to be traced, while 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, in which attackers transferred hundreds of millions of USDC stablecoin and bridged funds across chains.
Critics argued that Circle, the issuer of USDC, could have acted faster to freeze assets and limit 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 tied 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 regulation, in partnership with Anchorage Digital, a federally regulated crypto bank. The effort is led by former White House crypto advisor Bo Hines. Furthermore, Tether is preparing for a full audit of its reserves for the first time, a long-promised step aimed at improving transparency and aligning with stricter regulatory expectations for stablecoins.