What is Tether and Its Tokens?
Reasons for Blocking Funds by Tether
Sanctions by the US and Other Jurisdictions
EU legislation may also serve as basis for blocking, specifically sanction lists or AML directive requirements (AMLD). Although Tether is not registered in the EU, it declares global compliance (within its "world-class compliance program") and effectively complies with European sanctions and AML/CFT laws alongside US laws. EU Directives on AML (AMLD 4−6) require cryptocurrency industry controls, including transaction monitoring and suspicious asset freezing.
Official Requests from Law Enforcement and Regulatory Bodies
These can include:
However, Tether does not directly freeze tokens at the request of individual users (e.g., fraud victims). Private individuals cannot directly request another wallet’s blocking without a corresponding law enforcement or judicial request. Users must first contact the police, who submit requests through courts or authorities to Tether.
Voluntary Preventive Measures
Thus, Tether’s voluntary policy has evolved: previously (up to 2022), the company blocked primarily upon requests, but by 2023−2024, it began proactively initiating blocks (especially concerning sanctioned and widely recognized criminal wallets) to protect the ecosystem and reputation and to cooperate with the global cybersecurity community.
Can Funds Be Unblocked?
There certainly are examples of successful unblocking. According to public blockchain data, out of 5131 blocked wallets in Tron and Ethereum, a total of 330 wallets have been removed from the blacklist. This accounts for just 6% of blocked wallets, a small number and the exact unblocking procedure is not specified anywhere.
What is the Volume and Frequency of Tether's Blocking Now?
The chart below illustrates how both the volume of blocked funds and the number of blocked wallets have increased recently.
The chart clearly shows a noticeable increase in asset freezes subsequent to Tether's implementation of voluntary blocking measures in December 2023.
How is the Blocking Mechanism Implemented in Tether’s Smart Contracts?
Let’s examine the source code of these smart contracts:
The smart contract implements the blocking mechanism via three key functions:
Inspecting the smart contracts reveals that the owner on the Tron network is TBPxhVAsuzoFnKyXtc1o2UySEyd
PHgATto, while on Ethereum it is 0xC6CDE7C39eB2f0F0095F41570af
89eFC2C1Ea828.
The owner of the USDT smart contract on Tron.
The owner of the USDT smart contract on Ethereum.
By looking up these addresses on any blockchain explorer, you’ll discover they’re not simple cold wallets but multisig smart contracts.
The process for operations requiring confirmations involves two steps:
A key drawback of multisig wallets is the delay between proposing a fully parameterized transaction and its actual execution on the blockchain. During this window, anyone monitoring pending transactions can inspect — and potentially exploit — the transaction details before it’s finalized.
Collecting Blocks through Tether’s Multisig Wallet
First, let’s fetch all transactions associated with these wallet smart contracts:
For fetched Tron transactions, we observe the following smart-contract calls:
On Ethereum, the pattern shifts:
The function code is as follows:
This function takes three parameters:
Example of calling the submitTransaction function.
On success, the function returns a new transaction identifier and emits two events simultaneously:
Example of emitted events.
Now we need to:
All submitTransaction calls have been extracted for analysis:
This produces a table summarizing each address-blacklisting initiation:
The table below lists only the final confirmTransaction calls — those that satisfy the required confirmation threshold — for each transaction, with each decoded transactionId recorded.
As the final step of this analysis, we match each submitTransaction call with its corresponding final confirmTransaction call by transaction ID, and compile the results into one table:
We now have both the initiation and completion records for each blacklist addition, giving us precise start and end timestamps for the entire process.
Analyzing the Impact of the Vulnerability and Volume of «Saved» Funds
The longest observed delay on Tron was 58 days, while on Ethereum it soared to 678 days—nearly two years.
Finally, let’s compute the key metrics—deposits, withdrawals, and frozen balances—for blocked wallets during the interval between blacklisting initiation and completion:
However, it would be naive to assume that everyone who withdrew funds knew they were about to be blacklisted. To flag potential insiders, we apply a heuristic:
Under these criteria:
Let’s visualize the monthly trends for potential insider activity:
With such prolonged confirmation delays, savvy wallet owners can anticipate impending blacklists and migrate assets to fresh, “clean” addresses. Moreover, this workflow could be fully automated—potentially protecting funds in up to 99% of cases.
Conclusion
Tether should therefore review its internal blacklisting procedures and eliminate any possibility that information about an imminent freeze appears on a public blockchain before the measure is actually carried out.