Breaking Down Tether’s Latest Sanctions: 161 Wallets Frozen, 11 with USDT Holdings

For almost a decade, Tether cruised along with little attention to rules. But things took a turn three weeks after the FBI and Secret Service came into the picture. Now suddenly they decide to “proactively enforce OFAC sanctions” and freeze wallets. It’s a surprise move, raising eyebrows as regulators watch closely. This sudden shift could mean a major change ahead for Tether.

In a bid to safeguard against potential misuse, Tether, the force behind USDT, took the proactive step of freezing 161 Ethereum wallets associated with individuals on the US Office of Foreign Asset Controls (OFAC) list. The security measure is directly linked to preventing any potential risks related to the sanctioned wallets. 

Unfolding Wallet Details After the Freeze

However, the reports indicate a grave concern as 150 of the restricted wallets currently show no holdings of USDT, leaving 11 wallets with a collective sum of over 3.5 million USDT. One wallet, notably, holds a significant 97% share of this reserve.

Some wallets still hold USDT after the freeze, with a few carrying 20,000 to 60,000 tokens. While, other wallets hold smaller amounts, including one with just 16% in USDT. Before the freeze, a wallet moved 400,000 USDT via two unblocked wallets, making it challenging to trace these funds as Tether didn’t freeze these intermediaries.

But looking at the flip side, Blockchain investigations also suggest that these frozen tokens might exist across multiple chains, including Ethereum Layer 2 networks. While Polygon showed some limited USDT holdings, Arbitrum and Optimism networks yielded no leads concerning sanctioned wallet balances. 

Complications with Current Policy? 

Looking at the higher risk, currently, Tether has a wallet-freezing policy that applies to its platform only. Now, it aims to extend its sanctions control to the secondary market to better cooperate with government agencies and ensure safe stablecoin use.

This action by Tether, while emphasizing a security-driven approach, raises pertinent questions about the nature of previous token ownership and recent transaction trails. CEO Paolo Ardoino called it a precaution against USDT misuse. Tether will freeze existing and future SDN addresses, he said. However, as of now, there is no clarity and Tether has not responded yet on the matter officially. All in all, the move underscores Tether’s commitment to tightening security measures in the face of potential risks. 

Community Reaction

Some people in the crypto world see this as a positive move. They think it might help stablecoins be used more widely and be better regulated.