In a significant development, the world’s largest stablecoin issuer, Tether, has frozen a total of 326 wallets containing $435 million worth of Tether (USDT) to assist law enforcement agencies in the United States. This move comes in response to concerns raised by Senator Cynthia M. Lummis and Congressman J. French Hill regarding the use of stablecoins for illicit activities such as money laundering and terrorist financing. Tether aims to become a trusted partner and contribute to the global expansion of dollar hegemony. This article will explore the freezing of Tether wallets and its impact on combating illicit activities.
A Historic Milestone for Tether
Tether implemented a “wallet-freezing policy” on December 1st, as a proactive measure to combat the illicit use of stablecoins. This policy involves freezing all wallets listed on the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) list. Tether considers this policy to be a “historic milestone” that sets a precedent in the industry by expanding sanctions controls to the secondary market. By doing so, Tether demonstrates its commitment to foresight and vigilance in addressing illicit activities facilitated through stablecoins.
Tether has taken active steps to collaborate with law enforcement agencies in the United States, including the Secret Service and the Federal Bureau of Investigation (FBI). The stablecoin issuer recently onboarded the Secret Service onto its platform and is currently working towards onboarding the FBI. Tether has also played a pivotal role in assisting the Department of Justice (DOJ) in thwarting bad actors and aiding victims’ recovery. This partnership highlights Tether’s dedication to ensuring the integrity of its stablecoin and its commitment to maintaining a safe financial ecosystem.
Tether’s November letter detailed the company’s ongoing efforts to prevent the misuse of USDT for nefarious activities. The stablecoin issuer possesses a strong know-your-customer (KYC) and anti-money laundering (AML) program that is on par with sophisticated financial institutions. Tether’s KYC/AML program underwent a Title 31 examination conducted by the Internal Revenue Service (IRS) on behalf of the Financial Crimes Enforcement Network (FinCEN). As a registered Money Service Business with FinCEN, Tether prioritizes due diligence and background checks on potential customers, working with third-party services like Chainalysis and WorldCheck.
To ensure compliance and address potential risks, Tether cooperates with Chainalysis to secure a comprehensive independent analysis of USDT transactions across major blockchains. Additionally, Tether aims to explore more real-time monitoring capabilities. The use of Chainalysis’ Reactor Tool enables Tether to monitor transactions effectively and identify high-risk or suspicious activity. Notably, transactions involving mixers or sanctioned wallets are promptly flagged as high-risk. This heightened transaction monitoring demonstrates Tether’s commitment to upholding regulatory standards.
Tether’s collaboration extends beyond the United States, as it has worked with 19 jurisdictions worldwide and actively assisted ongoing investigations. In some cases, Tether has proactively offered information to law enforcement, reinforcing its commitment to combating illicit use of USDT. Notably, the stablecoin issuer has frozen 800 million USDT in secondary market addresses associated with hacks and thefts. Furthermore, Tether has collaborated with Israel’s anti-terrorist financing agency, the NBCTF, to identify and freeze wallets linked to terrorist organizations.
The freezing of Tether wallets marks a significant milestone in the fight against illicit activities involving stablecoins. Tether’s proactive approach, robust compliance program, and strong collaborations with law enforcement agencies worldwide demonstrate its commitment to maintaining a safe and secure financial ecosystem. As Tether continues to prioritize due diligence and transparency, it sets an example for the industry by expanding sanctions controls, monitoring transactions, and actively engaging with regulators. The freezing of Tether wallets is a testament to Tether’s dedication to combatting illicit activities and enables the company to contribute to a global expansion of dollar hegemony in a responsible and regulated manner.
