THORChain technical co-founder Chad Barraford reported Tether blacklisted four network addresses Friday, freezing approximately 1.45 million USDT across THORChain vault addresses. The stablecoin issuer unfroze the funds about two hours later, allowing trading to resume on the decentralized exchange.
Barraford said Tether provided no communication before or after the action. He posted on X that THORChain was seeking a conversation with Tether to understand the decision and expressed hope the action was an error or misunderstanding.
The incident marks the third public report of Tether freezing funds in recent months. Cross-border payments platform Conduit Technology filed a lawsuit against Tether this week, alleging Tether froze $2.76 million in USDT in a wallet linked to a Brazilian investigation initiated in 2024. Two Thai nationals separately sued Tether in August, claiming the issuer froze $42.4 million in USDT following an alleged informal request from U.S. Homeland Security Investigations.
For THORChain, a decentralized liquidity protocol, the temporary freeze directly impacted operational liquidity and introduced counterparty risk. The blacklisting capability is inherent to Tether's centralized model, where the issuer can prevent movement of USDT from specific addresses for regulatory compliance or other reasons.
Barraford emphasized the lack of transparency. THORChain had no prior notification from Tether regarding the blacklisting, and the unfreezing occurred without any explanation from the stablecoin company.
The episode underscores the tension between centralized stablecoin control and the decentralized ethos of protocols like THORChain. While stablecoins are critical for DeFi liquidity pairs, their centralized control mechanisms present operational risks to on-chain platforms designed to operate without intermediaries.
