Questions Raised Over Tether’s Wallet Freezing Policy

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  • Tether has expanded its sanctions control to the secondary market, but its effectiveness has come in for questioning
  • 161 crypto wallets were frozen before the announcement, but 93% held no USDT tokens at all
  • Tether has recently taken steps to try and make itself more compliant with sanction laws

Questions have been raised over Tether’s recently announced sanctions control expansion, with research showing that 93% of the wallets it froze as a result held no USDT. Tether introduced its new policy over the weekend, which expanded its existing Sanctions controls to the secondary market and saw 161 wallets frozen. However, The Block reported that 150 of those wallets didn’t contain any USDT and some may never have.

Tether Wants to Improve the Image of Stablecoins

Tether said in a blog post over the weekend that its expanded Sanctions compliance was “designed to combat activity connected with Sanctioned persons on the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) List.”

Paolo Ardoino, CEO of Tether, emphasized the decision’s alignment with their dedication to maintaining the highest safety standards and fostering a secure stablecoin ecosystem:

By executing voluntary wallet address freezing of new additions to the SDN List and freezing previously added addresses, we will be able to further strengthen the positive usage of stablecoin technology and promote a safer stablecoin ecosystem for all users.

93% of Frozen Wallets Held to USDT

The practical upshot of Tether’s actions was the freezing of 161 blockchain wallets, although The Block found the move to be perhaps less effective than Tether made out: Tether froze 161 Ethereum wallets, but 150 held no USDT tokens, leading to uncertainty about their previous holdings.

The remaining 11 wallets contain over 3.5 million USDT, mostly concentrated in one address, linked to the recent Stake platform hack. This wallet, active before the freeze, saw hundreds of transactions in the past week.

Of the wallets holding USDT, two have around 20,000 tokens each, one nearly 60,000, and others smaller sums, including one with 16 cents. Two days before the freeze, the latter moved over 400,000 USDT received from THORChain through two other wallets, making tracking challenging. Notably, neither of the routing wallets appears frozen by Tether.