And why Bitcoin remains the only way out

With a market capitalization of around $186 billion, USDT has become a digital dollar for millions worldwide. However, the token's issuer can freeze funds on specific addresses at any time—and they regularly exercise this right.

In just the past six months, Tether blacklisted 2,362 addresses on the Ethereum and TRON networks, blocking $1.64 billion in total. While such actions typically target hackers and fraudsters, the very possibility of freezing means that even on a non-custodial wallet, the holder does not have complete control over their tokens.

Together with the team from the Bitcoin mixer Mixer.Money, we explore how the USDT freezing mechanism works, why ordinary users sometimes get caught in it, and why holding funds in stablecoins is riskier than holding Bitcoin.

The Ardoino List

USDT is a centralized stablecoin, and Tether does not hide this fact. The company's head, Paolo Ardoino, emphasizes this characteristic of the token (unlike some so-called decentralized projects) and often contrasts it with Bitcoin as an alternative.

The ability to freeze an address and forcibly destroy tokens is built into Tether's smart contracts on Ethereum (ERC-20), TRON (TRC-20), Solana, and other networks. While the function names may differ, the principle remains the same:

  • blacklist addition (addBlackList) — the address owner loses the ability to send USDT, and any transfer is rejected at the contract level. The address remains active: it can receive new USDT and freely manage the native coin of the network, such as ETH, TRX, or SOL;
  • blacklist removal (removeBlackList) — restores the ability to transfer tokens;
  • fund destruction (destroyBlackFunds) — permanently burns USDT on the blocked address. The owner cannot recover them.

After burning, Tether can issue an equivalent amount of tokens to another address. Reissuing is used when funds are returned to victims or transferred to wallets under law enforcement control.

“In other words, the issuer can seize dollars from one address and reissue them in favor of another,” notes Mixer.Money.

According to BlockSec, it takes an average of about two days from issuing a freeze order to its execution on the network. You can check the status of an address on the Ethereum and TRON networks using the company's checker.

Example of an Ethereum address on the blacklist. Source: BlockSec.

Debt Note vs. Digital Gold

Each freeze is initiated by an external request. According to BlockSec, Tether freezes an address based on a verified request from law enforcement—without notifying the holder or allowing for an appeal before the freeze. The user learns of the restriction only after the funds have been frozen. The T3 Financial Crime Unit (T3 FCU)—a joint project of Tether, TRON, and the analytics firm TRM Labs—executes the freeze within a day. Since its establishment in September 2024, the alliance has frozen over $450 million across 23 jurisdictions by May 2026.

On-chain analytics companies like Chainalysis, Elliptic, and TRM Labs identify stablecoins for freezing. They assign risk levels to wallets and link them together. If an address receives a high-risk score, AML systems increase the assessment for related wallets. Sometimes, ordinary users get caught in the restrictions if their coins have previously passed through an address deemed "dirty."

Analysts also track Bitcoin, but it is impossible to seize it from the owner without private keys.

USDT and USDC are debt obligations of a centralized issuer. The issuer maintains control at the contract level: blocking transfers, burning balances, and reissuing amounts. The holder manages private keys but not the token's rules.

Bitcoin has no administrator, blacklist functions, or a "big red button" like destroyBlackFunds. There is simply no one to execute such a request.

The risk of freezing does not disappear entirely. It shifts from the protocol level to exchanges, brokers, and other centralized services—where users are required to verify their identity and can have their accounts frozen.

Attempts to impose censorship within the Bitcoin network have already been made. In 2021, the mining company MARA launched the first OFAC-compliant pool in North America, filtering transactions based on sanctions lists. The community viewed this as a threat of censorship at the block mining level and sharply criticized the initiative. Two months after the announcement, MARA abandoned the experiment.

Converting USDT to Bitcoin removes the risk of freezing at the issuer level. However, it does not eliminate on-chain tracking: contrary to popular belief, the first cryptocurrency is not anonymous but pseudo-anonymous.

Privacy After Conversion

To obscure the connection between addresses, additional tools are required. There are several methods to sever the on-chain trail, each with its limitations:

  • CoinJoin — a joint mixing of coins from multiple users in a single transaction. This mechanism is usually recognized by analytical systems, so the mere act of using CoinJoin can increase the address's risk score;
  • centralized mixers — do not combine users in a single transaction but accept funds into their own pool and then send out different coins. This breaks the direct on-chain connection between input and output but requires trust in the service operator;
  • Bitcoin mixers using verified coins — do not mix users' funds with each other and do not use their own liquidity pool. Instead, they utilize verified clean coins from trusted investors, allowing them to sever the direct on-chain connection between incoming and outgoing transactions.

The last category includes Mixer.Money. Unlike CoinJoin, it does not mix funds from different participants. The bitcoin.mixer 2.0 algorithm uses verified clean Bitcoins from trusted investors, which helps break the direct link between incoming and outgoing transactions.

In "Full Anonymity" mode, coins are split in a premixer into random parts and sent to independent investors. After a random interval that protects against timestamp analysis, the sender receives an equivalent amount minus a fee. The funds arrive at two new addresses, not linked on-chain to the original wallet.

“CoinJoin is easily identifiable on-chain and increases the risk score by itself. Many exchanges and brokers warn of account freezes for using such services,” emphasize Mixer.Money.

Tether's Panopticon

The freezing function aids in investigating crimes and returning funds to scam victims. During its operation, the T3 FCU has been involved in cases related to money laundering, drug trafficking, terrorism financing, and activities of North Korean hacker groups. The FATF described the unit as "an invaluable resource for law enforcement worldwide." Such activities help build trust among regulators in the crypto industry as a whole.

However, this system has a downside. USDT remains a centralized asset, and access to funds ultimately depends on the issuer's decisions and government requests. Essentially, the stablecoin has become a node in a global surveillance system: a private company connected to hundreds of agencies and analytics services can freeze "digital dollars" almost anywhere in the world.

In this sense, the USDT ecosystem resembles a digital panopticon: most users never encounter restrictions directly but are aware that such possibilities exist. The effectiveness of this mechanism strengthens regulators' trust but simultaneously continues to blur the lines of financial autonomy, already narrowing as cash is gradually displaced.

“Diversification” among major stablecoins merely dilutes dependence on a single company, but the freezing architecture remains.

Bitcoin has neither an administrator nor a central control point, making it impossible to execute a freeze request at the protocol level. This makes it the only major digital asset that does not depend on the decisions of an issuer, regulator, or bank. The first cryptocurrency cannot be frozen, seized, or burned by a third party's decision, and its issuance rules remain unchanged regardless of inflationary policies or legislative changes.

Bitcoin protects against arbitrary freezing of funds but does not hide financial activity from prying eyes. All transactions are recorded in a public ledger and can be analyzed years after they occur. Solutions for enhancing privacy, such as Mixer.Money, help reduce the digital footprint.