Tether, the stablecoin issuer, informed CryptoSlate that it would freeze any addresses associated with sanctioned entities. This decision follows reports suggesting that certain state actors were using Tether’s USDT tokens to bypass US sanctions.

A spokesperson for the company stated that Tether respects the Office of Foreign Assets Control (OFAC) SDN list and is committed to promptly freezing addresses linked to sanctions. Over the past year, Tether has proactively frozen addresses holding significant amounts of digital assets involved in unlawful activities. For example, the company froze 32 addresses holding $873,118.34 connected to illicit activities in Israel and Ukraine last year. Tether’s CEO, Paolo Ardoino, stated that these actions demonstrate the company’s dedication to establishing higher safety standards within the emerging industry. Tether’s USDT is the largest stablecoin by market capitalization, with an approximately $110 billion circulating supply.

Despite Tether’s efforts to comply with regulations, recent reports indicate ongoing exploitation of the USDT stablecoin by terrorist groups and sanctioned nations to evade restrictions. For instance, Reuters reported that Venezuela’s state-owned oil giant, PDVSA, was using the USDT stablecoin for crude oil and fuel exports amid renewed US sanctions.

US Treasury Deputy Secretary Adewale Adeyemo alerted Congress to Russia’s increasing adoption of alternative payment methods, such as Tether’s USDT stablecoin, to evade economic sanctions. A United Nations report highlighted the prevalence of cryptocurrency-based money laundering, particularly through Tether or USDT on the TRON blockchain, with illegal online gambling platforms being major facilitators. These developments led US Senator Elizabeth Warren to advocate for robust regulatory measures, including anti-money laundering authorities, for any proposed stablecoin regulations.

According to the lawmaker, excluding stablecoin issuers and other DeFi intermediaries from any stablecoin legislation’s AML/CFT requirements could allow bad actors to benefit from the increased crypto trading activities facilitated by the law.