Tether, a prominent crypto company and issuer of the world's largest stablecoin, announced on Thursday that it has frozen $344 million worth of USDT tokens across two wallets on the Tron blockchain, following requests from US authorities. The freeze was implemented after the authorities flagged the addresses for alleged links to illicit activities, thereby preventing further movement of the funds.
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 were linked to 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 reignited.
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 allow transactions to be tracked, while issuers have the ability to freeze assets under certain conditions. This issue has been brought to the forefront after the recent $285 million exploit of Drift Protocol, in which attackers transferred hundreds of millions of USDC stablecoins and bridged funds across chains. Critics argued that Circle, the issuer of USDC, could have acted faster to freeze assets and limit losses.
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 with the launch of the USAT token, which is compliant with federal stablecoin regulations, in partnership with federally regulated crypto bank Anchorage Digital. Furthermore, Tether is preparing for a full audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with stricter regulatory expectations for stablecoins.