The world’s largest stablecoin issuer has frozen 326 wallets containing $435 million worth of Tether (USDT) for US authorities, the company highlighted in a letter on December 15. The assets were frozen to assist law enforcement authorities, including the United States Department of Justice (DOJ), the Federal Bureau of Investigation (FBI), and the Secret Service.
The letter, addressed to Senator Cynthia M. Lummis and Congressman J. French Hill, followed another letter to politicians on November 16. Both letters were sent in response to Lummis and Hill’s Oct. 26 letter to Attorney General Merrick Garland. expressed concerns about the use of stablecoins for illegal activities, such as money laundering and terrorist financing.
In making both letters public, Tether CEO Paolo Ardoino noted that the company aims to become a “world-class partner” for the US to “extend the hegemony of the dollar globally.”
Tether’s commitment to prevent illegal use of USDT
In its latest letter, Tether highlighted that it implemented a “wallet freeze policy” on December 1 to help law enforcement agencies combat illegal use of stablecoins. Tether called it a “historic milestone” and said the “simple yet impactful” policy involves freezing all portfolios on the Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list.
Tether commented:
“By extending our sanctions controls to the secondary market, we are setting a precedent in the industry, leading the way with foresight and vigilance.”
Tether added that it recently installed the Secret Service on its platform and is currently working on integrating the FBI. The stablecoin issuer has also helped the DOJ “thwart bad actors and help victims recover.”
In its four-page letter in November, Tether had listed all its ongoing efforts to prevent the use of USDT for nefarious means. This included having a “strong” know-your-customer (KYC) and anti-money laundering (AML) program similar to that of “sophisticated financial institutions,” the letter said.
Tether’s KYC/AML program also underwent a Title 31 investigation conducted by the Internal Revenue Service (IRS) on behalf of the Financial Crimes Enforcement Network (FinCEN). Tether is registered as a money services company with FinCEN.
Tether said it is working with third-party services such as Chainalysis and WorldCheck to conduct due diligence and background checks on potential customers. The company also uses the services to conduct ongoing news and information checks on existing customers to ensure up-to-date information, the letter said.
Tether emphasized that its thousands of customers are mainly accredited individuals, trading firms and institutions. Due to the limited number of customers, compared to the millions of customers handled by some crypto exchanges, Tether conducts “much more thorough due diligence” on all of its customers.
Additionally, the stablecoin issuer is working with Chainalysis to secure comprehensive, independent analysis of USDT transactions on major blockchains, and explore more real-time monitoring capabilities.
Additionally, Tether said it is using Chainalysis’ Reactor Tool, which is used by several government agencies, to monitor transactions and identify risky or suspicious activity. For example, transactions involving mixers or sanctioned wallets are considered high-risk.
Extensive cooperation with global law enforcement agencies
According to the November letter, Tether has collaborated with 19 jurisdictions worldwide and assisted in ongoing investigations, in some cases proactively offering information to law enforcement.
Tether froze 800 million USDT at secondary market addresses mainly related to hacks and thefts, the letter said. The company said it assisted the DOJ with 68 different requests by freezing 188 wallets containing 70 million USDT.
Tether worked with Israel’s terrorist financing agency, the NBCTF, to identify and freeze wallets linked to Hamas and other terrorist organizations. Tether said its relationship with the NBCTF began before the October attack and that it will continue to work with the organization to prevent illegal use of USDT.