On Thursday, Tether, the company behind the world's most widely used stablecoin, announced that it had frozen approximately $344 million worth of USDT tokens in two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged the addresses for their alleged connections to illicit activities. As a result, the transfer of these funds has been halted. The nature of the activities and the identities of the wallet owners were not disclosed by the company.
However, according to AMLbot, a blockchain analytics firm, these addresses appeared in documents and posts related to scams. This development comes at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under scrutiny. 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 certain conditions. This issue gained attention earlier this month after 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, 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 collaborate 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.
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. This effort is led by former White House crypto advisor Bo Hines.
Additionally, Tether is preparing for a full 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.