On Thursday, Tether, the company behind the world's largest stablecoin, announced that it had frozen $344 million worth of USDT tokens in two wallets on the Tron blockchain, following requests from US authorities. The decision to freeze the assets was made after the addresses were flagged for suspected links to illicit activities.
As a result, further movement of the funds was prevented. 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, the addresses appeared in documents and posts related to scams. This move comes at a time when the role of stablecoin issuers in preventing the transfer of funds linked to illegal activities is under scrutiny. The Financial Action Task Force recently cautioned 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. 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 more swiftly 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 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.
The company is also expanding its presence in the US market, having launched 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 step aimed at enhancing transparency and aligning with stricter regulatory expectations for stablecoins.