USDT as a Tool for Global Surveillance: Why Tether Can Freeze Your Funds at Any Moment
With a market capitalization of approximately $186 billion, USDT has become the de facto digital dollar for millions of users worldwide. However, behind the stablecoin's apparent stability lies a mechanism that can deprive a holder of access to their funds at any moment. Tether does not just issue tokens — it actively controls their circulation, and this has become particularly evident over the past six months.
In just six months, the issuer added 2,362 addresses to its blacklist on the Ethereum and TRON networks, freezing $1.64 billion on them. Formally, such measures are aimed at hackers and scammers, but the very existence of the freeze function means that even on a non-custodial wallet, the user is not the full owner of USDT.
The blocking mechanism is embedded in Tether's smart contracts on all supported blockchains. The addBlackList function deprives an address of the ability to send tokens, although it can still receive new USDT. removeBlackList restores this ability. And the destroyBlackFunds function irreversibly burns USDT at the blocked address, after which Tether can issue an equivalent volume of tokens on another wallet — for example, to return funds to victims or transfer them to law enforcement.
Each freeze is initiated upon an external request — from law enforcement agencies. The T3 Financial Crime Unit, created by Tether jointly with TRON and TRM Labs in September 2024, had already frozen over $450 million across 23 jurisdictions by May 2026. The user learns about the restriction after the fact — without warning and without the right to appeal before the freeze.
The problem is that even accidental holders can fall under restrictions. On-chain analytics companies like Chainalysis and TRM Labs assign risk levels to addresses. If funds once passed through a "dirty" wallet, AML systems raise the risk score for associated addresses as well. As a result, an ordinary user may find their USDT frozen without any fault of their own.
Such a situation is impossible with Bitcoin. BTC has no administrator, no blacklist function, and no "red button" to destroy funds. The only way to control it is at the level of centralized services, such as exchanges, where a user's account can be frozen. But the protocol itself remains beyond the reach of external decisions.
USDT and USDC are, in essence, debt obligations of centralized issuers. The holder owns the private keys but not the token's rules. The issuer retains full control at the contract level: blocking transfers, burning balances, and reissuing amounts. This makes stablecoins a convenient tool for law enforcement but simultaneously turns them into a node of a global surveillance system.
Attempts to introduce censorship at the Bitcoin level itself have already been made. In 2021, the mining company MARA launched an OFAC-compatible pool that filtered transactions based on sanctions lists. The community sharply criticized the initiative, and the experiment was shut down two months later. Bitcoin remains the only major digital asset that cannot be frozen, seized, or burned by a third-party decision.
However, converting USDT to Bitcoin does not eliminate on-chain surveillance. All transactions are recorded in a public ledger and can be analyzed years later. Breaking the on-chain link requires additional tools: CoinJoin, centralized mixers, or services on verified coins, such as Mixer.Money, which do not mix user funds but use clean coins from trusted investors.
My comment: The USDT ecosystem resembles a digital panopticon — most users never directly encounter restrictions but know that such a possibility exists. Diversifying among stablecoins only dilutes dependence on one company, but the freeze architecture itself remains unchanged. Bitcoin is the only asset that protects against arbitrary seizure, but its pseudonymity requires additional measures to maintain privacy.