Tether Again Demonstrates Ability Of Cryptocurrencies To Protect Users From Money Laundering Risks After Million Dollar Freeze | Mitchell, Williams, Selig, Gates & Woodyard, PLLC


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Decentralized finance still puzzles many people whose only exposure to the financial sector is through traditional financial institutions. Comments heard on holiday tables most likely included a reference or two to “that crypto stuff just for criminals.” While decentralized finance will fight bad actors, like all financial institutions unless we revert to the barter system and money is never heard again, stabilized coins like Tether have the ability to stop risk by freezing the addresses of criminals.

If you are new to this business, you might be wondering what it means to be a stablecoin. A stablecoin is a digital currency that is pegged to a “stable” reserve asset like the US dollar or gold. Stablecoins are designed to reduce volatility compared to non-pegged cryptocurrencies like Bitcoin. So when Tether froze nearly a million dollars in a single user account, thinking of the action in the most simplistic form, it would be one of the most effective ways of centralized or decentralized funding for an institution. supervisory to intervene and protect funds from being scattered to the bad guys. Thanks to the address freeze, Tether was able to help recover funds stolen by hackers, funds under investigation or compromised.

Tether and other stablecoins regularly aid law enforcement with investigations and have helped recover tens of millions of stolen dollars. This unique ability to raise funds as opposed to more traditional financial institutions is something the AML community will continue to watch with enthusiasm and enthusiasm. Cryptocurrency and decentralized finance are here to stay and may in fact lead to a higher rate of success and recovery of illicit funds than our current traditional systems. For the sake of compliance and sustainability, decentralized finance is evolving rapidly in developing creative and unique ways to protect funds from potential fraudsters and other bad actors.

Tether began banning blockchain addresses in 2017 and has blocked more than 500 addresses on Ethereum to date, according to The Block’s data dashboard. Tether also has a “clawback” mechanism, which means it can freeze USDT and reissue it in some cases. For example, if a user sends the USDT to the wrong address, it can help recover it by freezing the USDT sent to the wrong address and reissue a new USDT to the user.

However, in this latest seven-digit freeze, funds remain at the frozen address. Such cases usually mean that a frozen address is the subject of litigation or is under investigation by a law enforcement agency.


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