On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen approximately $344 million worth of USDT tokens held in two wallets on the Tron blockchain. This move was made in response to requests from US authorities, who had flagged the addresses due to suspected links to illicit activities. As a result, further movement of these funds has been prevented.
The nature of the alleged activities and the identities of the wallet owners have not been disclosed by the company. However, according to AMLbot, a blockchain analytics firm, the addresses in question appeared in documents and posts related to scams. This development comes amidst ongoing debates about the role of stablecoin issuers in preventing the transfer of funds linked 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.
The transparency of public blockchains allows transactions to be traced, while 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 large amounts 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.
In response, 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, supporting 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 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. Furthermore, Tether is preparing for a full audit of its reserves for the first time, a long-promised step towards improving transparency and aligning with stricter regulatory expectations for stablecoins.