On Thursday, Tether, the company behind the world's largest stablecoin, announced that it has frozen approximately $344 million worth of USDT tokens residing in two wallets on the Tron blockchain. This decision was made in response to requests from US authorities, who had flagged the addresses due to suspected links to illicit activities.
As a result, the movement of these funds has been halted. The nature of the activities and the controllers of the wallets were not disclosed by the company.
However, according to AMLbot, a blockchain analytics firm, the addresses in question appeared in documents and posts related to scams. The move highlights the ongoing debate surrounding the role of stablecoin issuers in preventing the transfer of funds tied to illegal activities. Recently, the Financial Action Task Force 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 specific conditions.
This issue gained attention earlier this month following the $285 million exploit of Drift Protocol, where attackers transferred hundreds of millions of USDC stablecoins and bridged funds across chains. Critics argued that Circle, the issuer of USDC, should 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 authorities.
Tether claimed that it collaborates with law enforcement when wallets are connected 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 Anchorage Digital, a federally regulated crypto bank, led by former White House crypto advisor Bo Hines. Tether is also preparing for its first-ever full audit of reserves, a long-promised step aimed at enhancing transparency and aligning with stricter regulatory expectations for stablecoins.