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And why Bitcoin remains the only real alternative

With a market capitalization of around $186 billion, USDT has become the global digital dollar for millions. However, a key feature that many overlook is that the issuer can freeze your funds at any time. And Tether actively uses this right.

In the last six months alone, the company has blacklisted 2,362 addresses on the Ethereum and TRON networks, blocking $1.64 billion on them. Formally, these are measures against hackers and fraudsters, but the very fact that blocking is possible means that even on a non-custodial wallet, you are not the full owner of the tokens.

Let's break down the mechanism of USDT freezing, why ordinary users get caught in the crossfire, and why holding stablecoins is riskier than holding Bitcoin.

The Ardoino Mechanism: How the Blacklist Works

USDT is a centralized stablecoin, and Tether does not hide this. Company CEO Paolo Ardoino directly emphasizes this feature, contrasting it with Bitcoin. The ability to block an address and forcibly destroy tokens is embedded in smart contracts on Ethereum (ERC-20), TRON (TRC-20), Solana, and other networks. The functions are named differently, but the essence is the same:

• addBlackList — the address owner loses the ability to send USDT. Any transfer is rejected at the contract level. The address remains active: it can receive new USDT and freely use the native coin (ETH, TRX, SOL).
• removeBlackList — restores the ability to transfer tokens.
• destroyBlackFunds — irreversibly burns USDT at the blocked address. It is impossible to recover them.

After burning, Tether can issue an equivalent volume of tokens at another address. Re-issuance is used when funds are returned to victims or transferred to law enforcement control. Essentially, the issuer can take dollars from one address and re-issue them in favor of another.

According to analysts, it takes an average of about two days between issuing a blocking order and its execution. You can check the status of an address through specialized checkers.

Promissory Note vs. Digital Gold

Behind every block is an external request. Tether freezes an address based on a single verified law enforcement request — without warning the holder or any appeal procedure. The user learns about the restriction after the fact. The T3 Financial Crime Unit (T3 FCU), a joint project of Tether, TRON, and TRM Labs, carries out the block within 24 hours. Since September 2024, the alliance has frozen over $450 million across 23 jurisdictions.

The stablecoins themselves for blocking are found by on-chain analytics companies like Chainalysis, Elliptic, and TRM Labs. They assign risk levels to wallets and link them together. If an address receives a high risk score, AML systems also raise the assessment for wallets associated with it. Sometimes, random users whose coins once passed through a recognized "dirty" address fall under restrictions. Analysts also track Bitcoin, but it is impossible to take it from the owner without private keys.

USDT and USDC are debt obligations of a centralized issuer. It retains control at the contract level: blocks transfers, burns balances, re-issues amounts. The holder controls the private keys, but not the token's rules. Bitcoin has no administrator, no blacklist function, and no "big red button" like destroyBlackFunds. There is simply no one to execute such a request.

The risk of blocking does not disappear entirely. It shifts from the protocol level to the level of exchanges, exchangers, and other centralized services — where the user's documents are checked and accounts can be frozen.

Attempts to impose censorship within the Bitcoin network itself have already been made. In 2021, mining company MARA launched an OFAC-compliant pool that filtered transactions against sanctions lists. The community sharply criticized the initiative, and the experiment was shut down two months later.

Converting USDT to Bitcoin removes the risk of freezing at the issuer level. But it does not eliminate on-chain surveillance: contrary to the stereotype, the first cryptocurrency is not anonymous, but pseudonymous.

Privacy After Conversion

Additional tools are required to hide the link between addresses. There are several ways to break the on-chain trail, and each has its limitations:

• CoinJoin — joint mixing of coins from multiple users. This mechanism is usually recognized by analytical systems, and the very fact of using CoinJoin can increase the risk score of an address.
• Centralized mixers — receive funds into their own pool and send out other coins. This breaks the direct on-chain link but requires trust in the operator.
• Bitcoin mixers on verified coins — do not mix user funds with each other. Instead, they use clean coins from trusted investors, which breaks the link between incoming and outgoing transactions.

Mixer.Money belongs to the last category. Unlike CoinJoin, it does not mix the funds of different participants. The algorithm uses verified clean Bitcoins from trusted investors, breaking the direct link between incoming and outgoing transactions. In "Full Anonymity" mode, coins are split into random parts in a premixer and sent to independent investors. After a random interval, the sender receives an equivalent amount to two new addresses, not on-chain linked to the original wallet.

The Tether Panopticon

The freeze function helps investigate crimes and return funds to victims. T3 FCU has been involved in cases related to money laundering, drug trafficking, terrorist financing, and the activities of North Korean hacker groups. FATF called the unit an "invaluable resource for law enforcement agencies." Such activities contribute to growing regulatory trust in the crypto industry.

But this system has a downside. USDT remains a centralized asset, and access to funds depends on the issuer's decisions and requests from authorities. Essentially, the stablecoin has become a node in a global surveillance system: a private company, connected to hundreds of agencies and analytical services, capable of freezing "digital dollars" almost anywhere in the world.

The USDT ecosystem resembles a digital panopticon: most users never directly face restrictions, but know that such a possibility exists. The effectiveness of this mechanism strengthens regulatory trust but simultaneously blurs the boundaries of financial autonomy.

My analysis: Diversification among major stablecoins only dilutes dependence on one company, but the freezing architecture itself remains. Bitcoin, lacking a single center of control, remains the only major digital asset that does not depend on the decisions of an issuer, regulator, or bank. It cannot be frozen, seized, or burned by a third party's decision. However, Bitcoin does not hide financial activity. Solutions for enhancing privacy, such as Mixer.Money, are necessary to reduce the digital footprint.