In a recent development, Tether, the world’s largest stablecoin issuer, has taken a significant step towards combating illicit activities associated with stablecoins. The company has frozen 326 wallets, containing a total of $435 million worth of Tether (USDT), to assist U.S. law enforcement authorities, including the U.S. Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the Secret Service.
This action was highlighted in a letter addressed to Senator Cynthia M. Lummis and Congressman J. French Hill, following their previous letter to Attorney General Merrick Garland expressing concerns about the use of stablecoins for illegal activities such as money laundering and terrorist financing.
Tether has implemented a groundbreaking “wallet-freezing policy” as of December 1st. This policy aims to help law enforcement agencies combat the illicit use of stablecoins. The company’s strategy involves freezing all wallets listed on the Office of Foreign Assets Control’s (OFAC) Specially Designated Nationals (SDN) list, an approach that Tether considers to be a “historic milestone.” By expanding sanctions controls to the secondary market, Tether intends to set a precedent in the industry and lead with foresight and vigilance.
Tether has also emphasized its commitment to becoming a “world-class partner” to the U.S. in order to expand the global dominance of the U.S. dollar. This goal aligns with Tether’s ongoing efforts to prevent nefarious activities associated with stablecoins.
In its previous letter, Tether outlined its strong know-your-customer (KYC) and anti-money laundering (AML) program, which it claims is at par with those found in sophisticated financial institutions. The stablecoin issuer’s program has undergone a Title 31 examination conducted by the Internal Revenue Service (IRS) on behalf of the Financial Crimes Enforcement Network (FinCEN). Tether is registered as a Money Service Business with FinCEN.
To ensure the highest level of due diligence, Tether collaborates with third-party services such as Chainalysis and WorldCheck. These partnerships allow Tether to conduct thorough background checks on potential customers and continuously monitor news and information related to existing customers. Tether’s customer base primarily consists of accredited individuals, trading firms, and institutions, which enables the company to perform more comprehensive due diligence compared to larger cryptocurrency exchanges.
Tether is working closely with Chainalysis to secure a comprehensive independent analysis of USDT transactions across major blockchains. This collaboration will further enhance Tether’s real-time monitoring capabilities. By utilizing Chainalysis’ Reactor Tool, Tether can monitor transactions and identify high-risk or suspicious activities. Transactions involving mixers or sanctioned wallets are flagged as high-risk, enabling Tether to take appropriate actions to combat illegal use.
Tether’s commitment to combatting illicit use of stablecoins extends globally. The company has collaborated with 19 jurisdictions worldwide, assisting ongoing investigations and proactively sharing information with law enforcement agencies. Notably, Tether froze 800 million USDT in secondary market addresses, most of which were associated with hacks and thefts. Additionally, Tether has aided the DOJ in 68 different requests by freezing 188 wallets containing 70 million USDT.
Tether’s collaboration with Israel’s anti-terrorist financing agency, the NBCTF, further exemplifies its dedication to preventing illicit use. The company has successfully identified and frozen wallets associated with terrorist organizations such as Hamas. Tether’s partnership with the NBCTF predates the attack in October, and they continue to work together to combat the misuse of USDT.
Tether’s decisive actions to freeze wallets associated with illicit activities demonstrate its commitment to combating money laundering, terrorist financing, and other forms of illegal use of stablecoins. By implementing a pioneering wallet-freezing policy and engaging in global partnerships, Tether is setting a precedent for the industry and working collaboratively with law enforcement agencies. As Tether continues to refine its KYC/AML program and enhance its monitoring capabilities through collaborations with Chainalysis, the stability and trustworthiness of the stablecoin ecosystem will be further strengthened.
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