Tether freezes billions in USDT as regulatory pressure intensifies

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Tether freezes billions in USDT

Cooperation with the US Department of Justice and Turkey

This week, Tether announced that it assisted the US Department of Justice in seizing nearly $61 million in USDT linked to “pig-butchering” schemes. In such scams, fraudsters build trust with victims and persuade them to transfer funds under the guise of investments. Earlier this month, the company also froze around $544 million in crypto assets at the request of Turkish authorities investigating illegal online betting and money laundering.

According to blockchain analytics firm Elliptic, by the end of 2025 Tether and Circle had blocked approximately 5,700 wallets holding a combined $2.5 billion in assets. About 75% of those addresses contained USDT at the time of freezing. The figures highlight the growing role of stablecoin issuers as compliance enforcers.

USDT supply declines for a second consecutive month

At the same time, the circulating supply of USDT has begun to shrink. In February, supply fell by roughly $1.5 billion following a $1.2 billion decline in January. This marks the largest monthly contraction in three years and is comparable to the period following the collapse of FTX in late 2022.

The reduction in supply may signal declining liquidity in the crypto market. However, Tether maintains that the changes reflect short-term reallocations rather than weakening demand. The company also noted that USDC experienced a similar multi-billion-dollar contraction during the same period.

Scale of freezes and impact on market liquidity

With USDT’s total market capitalization exceeding $180 billion, the frozen $4.2 billion represents about 2.3% of total supply. This is a significant share for an instrument widely used as a primary source of liquidity on both centralized and decentralized exchanges. Analysts estimate that during periods of stablecoin supply contraction, crypto trading volumes can fall by 10–20% over several weeks.

Historically, declines in stablecoin supply have been accompanied by increased volatility in BTC and altcoins. At the same time, aggressive wallet blacklisting has intensified debate over the degree of centralization among major stablecoins. The market is increasingly balancing compliance requirements with the principles of decentralization.

Recently we wrote that the crypto market plunged sharply following reports of an Israeli missile strike on Iran, heightening global uncertainty and triggering an immediate sell-off in risk assets. Total market capitalization fell to $2.21 trillion, down 5.49% over 24 hours. BTC is trading around $63,888, declining 5.77% in a day and 5.72% over the week.

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