Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen $344 million worth of USDT tokens in two wallets on the Tron blockchain, following a request from US authorities. The decision to freeze the assets was made after the addresses were flagged for alleged links to illicit activities, effectively preventing any further movement of the funds.
The nature of the activities and the identities of the wallet owners were not disclosed by the company. 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 once again under scrutiny. The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering. The transparency of public blockchains allows transactions to be traced, 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, 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 minimize losses, while the company stated that it only takes such actions when legally required or at the request of law enforcement and authorities. Tether claims to work 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 and was issued in partnership with federally regulated crypto bank Anchorage Digital.
The 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 with stricter regulatory expectations for stablecoins.