Tether Says It Has Frozen Roughly $4.2 Billion in USDT Tied to Criminal Activity Over the Past Three Years
Crypto News Desk
February 27 2026
The issuer of the world’s largest stablecoin, Tether Ltd., disclosed to Reuters that it has immobilised about $4.2 billion worth of its dollar‑pegged USDT tokens that were linked to suspected illicit activity since the start of 2023. The figure, which covers a three‑year window, underscores a growing trend of regulators and law‑enforcement agencies demanding greater cooperation from stablecoin providers in the fight against money‑laundering, fraud and sanctions evasion.
How Tether Freezes Tokens
Unlike most cryptocurrencies, USDT can be blacklisted at the protocol level. When a government or a court orders a freeze, Tether can render the targeted wallet address incapable of moving the tokens on the blockchain. This technical ability has made the firm a de‑facto partner for authorities seeking to stem the flow of illicit funds that use stablecoins as a convenient, low‑volatility conduit.
Recent High‑Profile Interventions
- U.S. Department of Justice – In early February, Tether helped the DOJ seize $61 million in USDT connected to “pig‑butchering” scams, where fraudsters cultivate personal relationships before coaxing victims into sending money.
- Turkish Law‑Enforcement – Later in January, the company blocked $544 million after receiving a request from Turkish authorities to disrupt a suspected illegal online‑betting and money‑laundering network.
According to blockchain‑analytics firm Elliptic, by the end of 2025 the two biggest stablecoin issuers, Tether and Circle, had collectively placed ≈5,700 wallets on a blacklist, freezing assets totalling about $2.5 billion. Roughly 75 % of those wallets held USDT at the time of the freeze, highlighting the token’s dominant role in the stablecoin ecosystem.
Shrinking USDT Supply
CoinMarketCap data show that the circulating supply of USDT fell by $1.5 billion in February, following a $1.2 billion drop in January. If the trend continues, February could mark the largest monthly supply contraction in three years, a pattern reminiscent of the market’s reaction after the 2022 FTX collapse. Tether attributes the decline to short‑term distribution shifts, not a waning demand for its stablecoin, noting that the rival USDC experienced a comparable multibillion‑dollar drawdown in the same period.
Analysis
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Regulatory Pressure Is Translating Into Action – The $4.2 billion figure demonstrates that stablecoin issuers are moving beyond passive compliance statements. By providing direct technical tools to freeze assets, Tether is positioning itself as a frontline collaborator in anti‑money‑laundering (AML) efforts.
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Impact on Market Liquidity – The recent supply pull‑backs suggest that a portion of frozen tokens is being removed from circulation for an indeterminate period. While the overall market cap of USDT remains above $180 billion, the contraction may tighten liquidity on secondary markets, especially if more large‑scale freezes follow.
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Potential for Higher Scrutiny – The visibility of these freezes could encourage regulators in other jurisdictions to seek similar cooperation, potentially prompting the development of formal AML frameworks for stablecoins.
- Reputation Management for Tether – Demonstrating a willingness to cooperate may help Tether mitigate criticism that it enables illicit activity. However, each freeze also underscores the scale of the problem and may fuel calls for more stringent oversight of stablecoin issuers.
Key Takeaways
- $4.2 billion in USDT linked to criminal activity has been frozen by Tether since 2023, a figure that reflects intensified law‑enforcement scrutiny.
- The firm’s ability to blacklist wallets allows it to act quickly on requests from authorities, exemplified by recent seizures in the United States and Turkey.
- Stablecoin supply data indicate a significant contraction in USDT circulation, the largest monthly decline in three years, echoing liquidity strains seen after the FTX fallout.
- The move signals a shifting landscape where stablecoin issuers are expected to play an active role in AML compliance, potentially reshaping market dynamics and regulatory expectations.
As the crypto industry continues to mature, the partnership between stablecoin providers and regulators is likely to deepen, with implications for both the security of the ecosystem and the fluidity of digital assets used in everyday transactions.
Source: https://cointelegraph.com/news/tether-freezes-4-2b-usdt-illicit-activity-report?utm_source=rss_feed&utm_medium=feed&utm_campaign=rss_partner_inbound
