Tether Froze $4.2B in USDT Tied to Illicit Activity: Report

Tether has frozen approximately $4.2 billion worth of USDT tokens tied to illicit activity over the past three years, according to a report published on Friday. The El Salvador-based stablecoin issuer told reporters that most restrictions were imposed starting in 2023, as regulators and law enforcement agencies ramped up pressure on crypto fraud and sanctions evasion. With more than $180 billion in outstanding USDt, the dollar-pegged token remains the largest stablecoin in circulation, up sharply from roughly $70 billion three years ago.

How Does Tether Freeze Illicit USDT Tokens?

Tether freezes USDT by blacklisting wallet addresses directly on the blockchain whenever authorities submit a formal request, rendering the tokens inside those wallets unmovable and unredeemable.

On Tuesday, the company confirmed it helped the US Department of Justice seize close to $61 million in USDt connected to pig-butchering scams. In these schemes, criminals cultivate personal relationships with victims before persuading them to transfer large sums of money.

Earlier in February, Tether also blocked roughly $544 million in cryptocurrency at the behest of Turkish law enforcement. Those frozen funds were allegedly tied to an illegal online gambling and money-laundering operation, according to the company.

Tether has assisted the US Department of Justice in seizing nearly $61 million in USDt tied to pig-butchering scams.

— Tether, Official Statement

Stablecoin Wallet Blacklists Surpass $2.5 Billion

Blockchain analytics firm Elliptic reported that by late 2025, stablecoin issuers Tether and Circle had collectively blacklisted around 5,700 wallets holding approximately $2.5 billion in frozen digital assets. Roughly three-quarters of those addresses contained USDt when they were restricted, according to Elliptic data, underscoring Tether's dominant role in industry compliance.

What Does the USDT Supply Drop Signal for Markets?

The USDt circulating supply is on track for its steepest monthly decline in three years, signaling potentially tighter liquidity across crypto markets. Supply fell approximately $1.5 billion in February following a $1.2 billion contraction in January, according to on-chain data. The back-to-back declines echo conditions last observed after the FTX collapse in late 2022.

Tether said the supply figures reflect short-term distribution shifts rather than weakening demand for its stablecoin. The company noted that USDC also experienced a multibillion-dollar reduction during the same period, suggesting broader market dynamics are driving the contraction.