How Tether’s $225M Freeze Rebuts Crypto’s “Hidden Money” Tag

  • Crypto has come under fire in Congress amid recent terrorism links.
  • A recent Tether report pokes holes at the viability of crypto use in criminal activities.
  • Regardless of recent efforts to recover illicit funds, lawmakers like Senator Elizabeth Warren demand more.

Over the past month, crypto has faced intense scrutiny from lawmakers over links to terrorism funding, as a Wall Street Journal report suggested groups like Hamas and Palestinian Islamic Jihad (PIJ) generated significant funding through crypto donations.

Amid ensuing debates on the extent of crypto’s use in terrorism financing and the viability of its use in crime, a recent collaboration between Tether, OKX, and the U.S. Department of Justice (DOJ) has reiterated the arguments of proponents of the nascent market.

Not the ‘Perfect Hidden Money?’

On Monday, November 20, Tether disclosed it has frozen 225 million USDT linked to an international human trafficking syndicate engaged in crypto romance scams. The stablecoin issuer noted that the move followed a months-long joint investigation with OKX and the DOJ using tools from blockchain analysis firm Chainalysis.

While not the intended purpose, the success of the investigation, and others like it, poke holes at some claims that have been made against crypto following the disputed WSJ report.

Congressional representative Brad Sherman, chair of the House Financial Services Subcommittee on Capital Markets and Investor Protection, had asserted that crypto assets are “designed to be perfect means for hidden money.” But Tether’s recent report and others like it suggest otherwise, strengthening arguments that crypto proponents have made. Tether noted:

“The transparency of blockchain transactions serves as a powerful deterrent to illicit activities, setting a significant precedent for the industry.”

The collaboration between Tether, OKX, and the DOJ follows a growing trend of crypto firms working with law enforcement to crack down on the illicit use of crypto. In October 2023, Binance helped Thailand authorities seize $277 million in crypto assets in another crypto romance scam bust. Binance also helped Israel freeze over 100 Hamas-linked accounts.

This willingness of crypto firms to cooperate with law enforcement, however, does not seem to be enough for crypto’s staunchest critics in Congress and the capitol like Elizabeth Warren. The senator has used the recent debate surrounding crypto-funded terrorism as fodder for her crypto-focused anti-money laundering (AML) and sanctions violations bill that has faced resistance from the crypto community over its implications for DeFi.

DeFi at Stake

Senator Warren’s AML bill hopes to impose Know Your Customer (KYC) requirements for decentralized crypto products, a move that will risk core DeFi narratives like the lack of censorship. Following the recent links of crypto to Hamas, the lawmaker has doubled down.

In an October 13, Politico interview, she argued that crypto-funded terrorism was a top priority while contending that her bill helped tackle the issue.

“The danger of crypto-financed terrorism is real and should be an urgent priority for Congress. There’s a growing bipartisan coalition of senators who are committed to passing this bill and fighting back against terrorism worldwide by choking off the financing,” she noted.

In an October 17 letter, Warren led a bipartisan group of 100 lawmakers to urge the President Joe Biden administration to crack down on crypto-funded terrorism.

On the Flipside

  • Romance scams have existed before the advent of crypto.
  • Many proponents argue that crypto involvement in terror financing is negligible compared to other sources of funding, although there is still ongoing debate about the extent.

Why This Matters

While bad actors exist in the crypto space like any other industry, Tether’s recent collaboration with the DOJ and OKX suggests law enforcement officials can trace these individuals using the right tools.

Read this to learn more about the recent debate surrounding crypto-funded terrorism in Congress:

Congress Rekindles Crypto-Terrorism Funding Controversy

Learn more about’s recent volume spike: Volumes Claim 2-Week High. But Here’s the Catch

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