Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen approximately $344 million worth of USDT tokens held in two wallets on the Tron blockchain, following requests from US authorities. The decision to freeze these assets was made after the addresses were flagged for suspected links to illicit activities, effectively preventing any further movement of the funds. Although the company did not disclose the nature of the activities or the identities of the wallet owners, blockchain analytics firm AMLbot reported that the addresses were mentioned in documents and posts related to scams. This development comes at a time when the role of stablecoin issuers in preventing the flow of funds linked to illegal transactions 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. Public blockchains enable the tracing of transactions, while issuers have the ability to freeze assets under specific conditions.
The issue gained attention earlier this month after the $285 million exploit of Drift Protocol, where attackers transferred hundreds of millions of USDC stablecoin 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, whereas the company stated that it only takes such actions when legally required or at the request of law enforcement and relevant authorities. Tether claimed that it collaborates with law enforcement agencies when wallets are linked to sanctions evasion or criminal networks, and has supported over 2,300 cases globally across 340 agencies in 65 countries. Furthermore, the company is expanding its presence in the US market with the launch of the USAT token, which complies with federal stablecoin regulations, in partnership with federally regulated crypto bank Anchorage Digital, led by former White House crypto advisor Bo Hines.
Tether is also 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 for stablecoins.