Tether, the stablecoin issuer, has recently introduced a voluntary wallet freeze policy, marking a significant move toward aligning with law enforcement and regulatory agencies. This initiative, as outlined in a blog post on December 9, signals a proactive step by Tether to cooperate with authorities.
From December 1 onwards, Tether has implemented secondary market controls aimed at freezing any activities associated with individuals or entities listed on the U.S. Office of Foreign Assets Control (OFAC) Specially Designated Nationals (SDN) list. This list includes companies and individuals linked to sanctioned countries, and freezing their activities is part of Tether's strategy.
The stablecoin issuer has clarified that this policy is intended to complement existing security measures and reflects a proactive effort to collaborate more closely with global regulators and law enforcement agencies. The U.S. Treasury Department utilizes the SDN list to restrict cryptocurrency transactions that could potentially be connected to illegal activities, such as funding terrorism and the unauthorized distribution of substances like fentanyl.
In a departure from its previous stance, Tether is now freezing wallets that have been added to the SDN list, contrary to its earlier position. For instance, in August 2022, Tether had stated that it wouldn't actively freeze addresses associated with sanctioned entities using services like Tornado Cash unless directed to do so by law enforcement. However, recent actions by individuals and criminal groups utilizing Tornado Cash to launder over $7 billion in cryptocurrency since 2019 have prompted this change.
Tether aims to bolster the stablecoin ecosystem's security and promote the active use of stablecoin technology by enforcing voluntary wallet address freezes for newly added and previously listed addresses on the SDN list. Tether, based in Hong Kong and the creator of the stablecoin Tether, has experienced a surge in market capitalization, reaching $90 billion amid increased regulatory scrutiny on cryptocurrency companies. Currently, Tether holds nearly 70% of the stablecoin market, indicating strong demand for its offerings.
