Tether strikes hard with 4.2 billion $ of illicit tokens frozen in 3 years

Tether, the issuer of the USDT stablecoin, has blocked 4.2 billion dollars of suspicious funds in three years. An action that divides: some see it as a major step forward against crypto crime, while others fear excessive centralization.

4.2 billion $ of USDT tokens frozen: Tether, the crypto sheriff?

In just three years, Tether has frozen 4.2 billion dollars worth of USDT tokens linked to illicit crypto activities. This colossal amount illustrates the extent of Tether’s commitment in its fight against financial crime. Indeed, thanks to an address blacklisting mechanism, the company can render USDT tokens unusable, a capability that makes it a privileged partner of regulators like the DOJ.

However, this proactive approach raises questions. How can a private company wield such power without a clear legal framework? For observers, Tether now plays a hybrid role, halfway between a crypto company and a regulatory authority. A position that, while effective against crime, could also weaken users’ trust in an ecosystem that is supposed to be decentralized.

The challenges of centralization grow for Tether

The massive freezing of 4.2 billion dollars of funds by Tether divides the crypto community. On one side, regulation advocates applaud a necessary measure to clean up the sector and avoid scandals like those of FTX or Terra. On the other, purists see it as a betrayal of the founding principles of cryptocurrencies: decentralization, censorship resistance, and financial freedom.

Critics point to Tether’s discretionary power, capable of blocking funds without trial or full transparency. A major risk for crypto users, who could see their assets frozen by mistake. In comparison, traditional banks offer legal recourse in disputes, a luxury USDT holders do not have.

Towards a new era of crypto regulation?

Tether’s actions could well accelerate the adoption of new global regulations. In Europe, the MiCA regulation already governs stablecoins, while in the United States, bills aim to strengthen the traceability of crypto transactions. A trend that could intensify, with increased compliance requirements for issuers like Tether.

Facing this regulatory pressure, alternatives are emerging. Decentralized stablecoins, like DAI, promise censorship resistance but struggle to compete with USDT’s massive adoption. Meanwhile, criminals adapt their methods, using mixers or unregulated exchanges to bypass freezes.

With 4.2 billion dollars frozen, Tether makes crypto history. While this action strengthens the fight against crime, it raises a key question: should decentralization be sacrificed for more security? The balance between innovation and regulation remains fragile but without rules, the era of cryptocurrencies will come to an end.