USDT issuer freezes Ethereum address with over $4.1m

Tether Holdings Limited, the Hong Kong-based company and the issuer of USDT, the world’s largest stablecoin by circulating supply, has frozen an account holding over $4.1 million of the token on Ethereum, on-chain data on June 19 reveals.

Tether freezes $4.1 million of USDT on Ethereum

Tether froze $4.11 million of USDT on June 19 without explaining, records captured by WhaleAlert on the same day reveal.

On Etherscan, an analytics platform for tracking ethereum (ETH) and Ethereum-based tokens, records show that the USDT issuer had marked the wallet as frozen. At the same time, the associated address had four tokens in total. Besides the USDT, other assets were labeled as “suspicious.”

It could not be immediately verified where the funds were from and why the USDT issuer decided to freeze the account. 

On Reddit, a user observed that the frozen account belonged to a Huobi user. Most of this Tether was funneled in March 2023, and, in his speculation, the owner might be involved in suspicious activities. As a result, the USDT issuer swooped in and froze the address’ holdings.

Tether Holdings Limited is a centralized entity and the official issuer of USDT. As of June 19, there was over $83.1 billion worth of USDT in circulating supply. 

Theoretically, each token in circulation in any blockchain or layer-2 platforms USDT is issued on is backed 1:1 with cash or cash equivalents. In this way, each USDT in circulation can be redeemed for a USD. 

For their offering, USDT plays a critical role in cryptocurrency, allowing the flow of capital from and to traditional finance while allowing holders to engage in other activities, including decentralized finance (DeFi).

Centralization concerns

Despite what USDT brings to the crypto table, the issuer’s ability to freeze assets is against the core principles espoused by the blockchain. Technically, cryptocurrencies are supposed to be borderless and censorship-resistant. 

Some people have criticized Tether Holdings Limited for freezing the address. On Reddit, a social media platform, one user said Tether acts like a bank and can freeze USDT on any chain the token is in circulation if ordered by law enforcement.

Another pointed out that the issuer has integrated a kill switch in the token’s code and can, at any point, block an address.