El Salvador-based stablecoin issuer Tether said it has frozen about $4.2 billion worth of its dollar-pegged crypto tokens over links to illicit activity, the bulk of it within the past three years.
Tether, which issues the world’s largest stablecoin, USDT, has more than $180 billion of its tokens in circulation, up sharply from roughly $70 billion three years ago. The company has the technical ability to remotely freeze tokens held in users’ crypto wallets when requested by authorities — a power that differentiates centrally issued stablecoins from decentralized cryptocurrencies such as Bitcoin.
This week, Tether said it assisted the U.S. Department of Justice in freezing nearly $61 million in USDT linked to so-called “pig-butchering” scams, a form of fraud in which perpetrators cultivate personal relationships with victims before persuading them to invest in fraudulent crypto schemes. The action lifted Tether’s cumulative frozen assets tied to illicit activity to $4.2 billion, according to a company spokesperson. Of that amount, $3.5 billion has been frozen since 2023.
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The scale of the freezes is a reflection of both the rapid expansion of stablecoins and the increasing use of crypto in cross-border fraud and laundering schemes. Tether has previously said it blocked wallets connected to human trafficking networks as well as activities linked to “terrorism and warfare” in Israel and Ukraine. Sanctioned Russian crypto exchange Garantex also said last year that Tether had blocked funds on its platform.
Stablecoins at the center of crypto enforcement
Stablecoins like USDT are primarily used as settlement and liquidity tools within the crypto ecosystem, allowing traders to move quickly between digital assets without exiting into traditional banking rails. Their transaction volumes have surged in recent years alongside broader crypto market growth.
That ubiquity, however, has drawn heightened scrutiny from regulators and enforcement agencies. Authorities worldwide have repeatedly raised concerns that crypto markets, which are generally less regulated than traditional financial systems, can be exploited for illicit finance.
The Financial Action Task Force (FATF), the global anti-money laundering watchdog, last year urged countries to intensify efforts to combat illicit finance in crypto markets. The group warned that inconsistent implementation of anti-money laundering standards across jurisdictions was creating vulnerabilities.
Blockchain researchers reported in January that money launderers received at least $82 billion in cryptocurrencies last year, a sharp increase from about $10 billion in 2020. The growth was attributed in part to the expansion of Chinese-speaking criminal networks and the rising sophistication of scam operations.
Tether occupies a unique position in this landscape. As the dominant stablecoin issuer, it serves as a critical liquidity backbone for global crypto trading. At the same time, its centralized control over USDT issuance allows it to intervene directly in suspicious transactions — a feature that some crypto purists view as antithetical to decentralization, but which regulators often regard as a compliance advantage.
The company’s ability to freeze funds has become an increasingly visible tool in enforcement actions. Tether is attempting to position itself as a responsible intermediary rather than a passive conduit for illicit flows by cooperating with authorities and blocking flagged wallets.
Yet the magnitude of frozen funds — $4.2 billion to date — highlights the scale of activity passing through stablecoin networks that later becomes subject to enforcement.
The figures reinforce concerns that rapid crypto adoption has outpaced regulatory frameworks in many jurisdictions. Against that backdrop, the pressure to strengthen compliance, enhance transaction monitoring, and cooperate with cross-border investigations is likely to intensify as volumes grow.
With more than $180 billion of USDT in circulation, Tether’s actions indicate that stablecoins are no longer peripheral instruments in digital finance. They sit at the core of the ecosystem — and increasingly at the center of the global effort to curb crypto-related crime.