On Thursday, Tether, the prominent crypto 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. This action was taken in response to requests from US authorities, who had flagged the addresses for purported connections to illicit activities.
As a result, the movement of these funds has been halted. The company declined to specify the nature of the alleged activities or the identities of those controlling the wallets. However, according to blockchain analytics firm AMLbot, the addresses in question appeared in documents and posts related to scams.
This development comes at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under scrutiny. The Financial Action Task Force has recently warned 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. This issue has gained attention following the $285 million exploit of Drift Protocol, in which 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 limit losses, while the company maintained 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. The company is also expanding its presence in the US market, having launched the USAT token in compliance with federal stablecoin regulations, in partnership with federally regulated crypto bank Anchorage Digital, with the effort 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 stricter regulatory expectations surrounding stablecoins.