Tether, the company behind the world's largest stablecoin, announced on Thursday that it has frozen approximately $344 million worth of USDT tokens held in two wallets on the Tron blockchain, following requests from US authorities. The decision to freeze the assets was made after the wallets were linked to alleged illicit activities, according to a blog post published by the company on Thursday, effectively preventing any further movement of the funds. The nature of the activities and the identities of the wallet owners were not disclosed by Tether.
However, according to AMLbot, a blockchain analytics firm, the 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. The Financial Action Task Force has recently warned that stablecoins are increasingly being used for illicit transactions, including sanctions evasion and money laundering.
Public blockchains allow transactions to be traced, while issuers have the ability to freeze assets under certain conditions. The issue gained attention earlier this month following the $285 million exploit of Drift Protocol, in which attackers moved hundreds of millions of USDC stablecoin and bridged funds across chains. Critics argued that Circle, the issuer of USDC, could have acted faster to freeze assets and limit losses, while the company stated that it only takes such actions when legally required or at the request of law enforcement and authorities. Tether claimed that it collaborates with law enforcement when wallets are tied 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 complies with federal stablecoin regulation, in partnership with Anchorage Digital, a federally regulated crypto bank, 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.