Tether temporarily blacklisted four THORChain vault addresses on Friday, freezing approximately 1.45 million USDT in network funds before unfreezing them hours later. Chad Barraford, THORChain's technical co-founder, said Tether provided no explanation for the action or prior communication.
Barraford reported on X that trading resumed about two hours after Tether unfroze all affected addresses. Before the unfreeze, THORChain was actively reaching out to Tether, hoping the action was an "error or misunderstanding," Barraford said.
The incident underscores the operational risk stablecoin issuers pose to decentralized protocols. Tether's ability to blacklist addresses means it can unilaterally freeze funds, impacting liquidity and user access within DeFi ecosystems.
This action follows recent legal challenges against Tether regarding frozen funds. Earlier this week, cross-border payments platform Conduit Technology filed a lawsuit alleging Tether froze $2.76 million worth of USDT, reportedly linked to a 2024 investigation by Brazilian authorities.
In August, two Thai nationals also sued Tether, claiming the company froze $42.4 million in USDT after an "informal request" from U.S. Homeland Security Investigations. These prior incidents illustrate a pattern of Tether freezing significant sums in response to legal or investigative requests.
For THORChain, a cross-chain decentralized exchange, such an event disrupts its core functionality of facilitating seamless asset swaps. While the funds were unfrozen quickly, the lack of transparency around the blacklisting raises questions for protocol operators and users regarding operational risk.
The 1.45 million USDT frozen on Friday is smaller than the amounts cited in the recent lawsuits but demonstrates Tether's consistent application of its blacklisting mechanism. Tether has not publicly commented on the THORChain incident or the reasons behind the temporary freeze.
