Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen approximately $344 million worth of USDT tokens across two wallets on the Tron blockchain, in response to requests from US authorities. The freeze was implemented after the authorities flagged the addresses for suspected links to illicit activities, effectively preventing any further movement of the funds. The nature of the activities and the controllers of the wallets were not specified by the company.
However, according to blockchain analytics firm AMLbot, the addresses appeared in documents and posts related to scams. This move comes as the debate surrounding the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under renewed scrutiny. The Financial Action Task Force (FATF) recently cautioned that stablecoins are increasingly being used 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 prominence earlier this month after the $285 million exploit of Drift Protocol, where attackers moved hundreds of millions of USDC stablecoin and bridged funds across chains. Critics argued that Circle, the issuer of USDC, could have acted more swiftly to freeze assets and limit losses, while the company asserted that it only takes such actions when legally required or at the request of law enforcement and authorities. 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. Furthermore, the company is 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, 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 towards enhancing transparency and aligning more closely with regulatory expectations for stablecoins.