Tether Freezes $85,877 USDt in Stolen Funds, Sparking Crypto Compliance Debate

Tether, the issuer of the world’s largest stablecoin, announced on Sunday that it had frozen $85,877 in USDt (USDT) tied to stolen funds, acting in collaboration with law enforcement. This move has reignited the debate over the role of centralized stablecoin issuers in enforcing crypto compliance. The freeze, while relatively minor compared to other such actions by Tether, adds to the company’s growing record of intervention. Tether has frozen over $2.5 billion in USDt linked to illicit activity and has blocked more than 2,090 wallets in cooperation with global authorities.

Unlike truly decentralized and censorship-resistant cryptocurrencies such as Bitcoin and Ethereum, where no single entity can block or reverse transactions, Tether and other stablecoin issuers can freeze USDt and their respective stablecoins at the smart contract level. This centralized control allows stablecoin issuers to quickly respond to hacks, scams, and regulatory pressure. In Tether’s case, it has translated into some of the largest asset freezes in crypto history. In November 2023, Tether froze $225 million in USDt from wallet addresses linked to a Southeast Asian human-trafficking and romance-scam network. The action was carried out in collaboration with US law enforcement, including the Department of Justice and the Secret Service. In June 2025, Tether took aim at 112 wallets holding roughly $700 million in USDt across the Tron and Ethereum blockchains. The funds were tied to Iran-linked entities, and the freeze was seen as part of broader efforts to enforce US sanctions amid rising geopolitical tensions.

These high-profile interventions reflect a shift in how stablecoins are perceived — not just as digital dollars, but as active instruments of financial enforcement. CEO Paolo Ardoino has embraced Tether’s evolving identity as a crypto compliance enforcer. “Tether’s ability to track transactions and freeze USDt linked to illicit activity sets it apart from traditional fiat and decentralized assets,” Ardoino wrote in a March blog post on Tether’s website. “We take our responsibility to combat financial crime seriously and will continue working closely with global law enforcement agencies.”

Tether’s ability and readiness to freeze user funds have raised concerns among some in the crypto community. Critics argue that if stablecoin issuers routinely cooperate with law enforcement, the result could resemble a central bank digital currency (CBDC), undermining the core crypto values of financial sovereignty and decentralization. Users on X called Tether’s recent action a “slippery slope.” One user wrote, “Can anybody explain how this isn’t exactly what a CBDC is?” Another person following the story noted that “centralized control has its moments.” In this case, the “quick response from Tether here saved $85k from disappearing into the void."