Tether, a leading crypto company and issuer of the world's largest stablecoin, announced on Thursday that it has frozen approximately $344 million in 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 alleged connections to illicit activities. As a result, further movement of the funds was prevented. The company did not disclose the nature of the activities or the identities of the wallet owners.
However, according to blockchain analytics firm AMLbot, the addresses appeared in scam-related documents and posts. This development comes as the debate surrounding the role and responsibility of stablecoin issuers in preventing the transfer of funds linked to illegal activities is once again in the spotlight. The Financial Action Task Force recently cautioned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion 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 this month following the $285 million exploit of Drift Protocol, in which attackers moved 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, while the company stated that it only takes such actions when legally required or at the request of law enforcement and 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 regulation, in partnership with federally regulated crypto bank Anchorage Digital. This 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 more closely with regulatory expectations for stablecoins.