On Thursday, Tether, the company behind the world's largest stablecoin, announced that it has 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 alleged ties to illicit activities, effectively preventing any further movement of the funds. The nature of the activity and the individuals controlling the wallets were not disclosed 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 illegal money transfers is reignited. The Financial Action Task Force recently warned about the increasing use of stablecoins for illicit transactions, including sanctions evasion and money laundering.
Public blockchains enable the tracing of transactions, while 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 stablecoin 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 has 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 federally regulated crypto bank Anchorage Digital. 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 improving transparency and aligning with stricter regulatory expectations for stablecoins.