Russians Warned: USDT Cryptocurrency Asset Freezing Possible by US Decision

Freezing assets in cryptocurrency may affect Russian holders of the USDT stablecoin: according to the head of PSB, Petr Fradkov, the issuer Tether Limited retains full control over the issued tokens and can restrict access to funds not only due to illegal operations but also at the direct signal of the American administration.

Why the Risks for USDT Have Become a Topic in Russia

Petr Fradkov, who heads PSB, considered one of the key banks for the Russian military-industrial complex, stated that USDT holders should not consider this instrument completely independent of external control. According to him, the issuing company can freeze funds in accounts if it deems it necessary.

Fradkov emphasized that such decisions can be made not only regarding wallets associated with illegal activities, money laundering, or evasion of Know Your Customer (KYC) procedures. He claims that access restrictions can also occur simply at the direction of the US administration.

Such precedents already exist. Such mechanisms have already been applied. In particular, in recent years, large assets of owners from Iran and Russia have been blocked.

Tether, the Dollar, and Dependence on the American Market

Separately, the head of PSB drew attention to the financial side of the issue. Tether Limited, which issues USDT, is among the major holders of US Treasury bonds. Therefore, Fradkov believes that the basic peg to the dollar and the US debt market does not disappear, even when it comes to a digital instrument.

This, in his opinion, demonstrates the vulnerability of the stablecoin: cryptocurrency can operate through blockchain, and each transaction in informatics is recorded in the digital environment, but the asset in the owner's accounting still depends on the rules and decisions of the issuer. Such a freeze in programming effectively means restricting access to funds at the system level.

There should be no illusions: the technology has changed, yes, but the dependence remains. This shows that even a modern digital instrument can remain fully controlled by the issuer.

What Freezing, Blocking, and Liquidating Crypto Assets Mean

Freezing assets in cryptocurrency usually means that the owner loses the ability to freely dispose of funds: transferring them, withdrawing to an exchange, exchanging, or using them in transactions. At the same time, the tokens themselves may remain at the address or within the account, but access to operations is restricted.

Freezing is closer to a targeted ban on the movement of specific funds. Most often, it concerns tokens or accounts for which the issuer, exchange, or another infrastructure participant halts operations until verification, court decision, regulatory requirement, or internal compliance is completed.

Liquidation of crypto assets is a different process. It is not related to banning access but to forcibly closing a position, for example, in trading with borrowed funds when the collateral is no longer sufficient to maintain the deal. In freezing or blocking, the asset is restricted, while in liquidation, the position is effectively closed.

It is impossible to completely block all cryptocurrency as a technology with one decision if the network is decentralized and continues to operate. However, it is possible to restrict a specific wallet, tokens at a certain address, an exchange account, fund withdrawals, or a bank account associated with crypto operations. Centralized stablecoins like USDT have higher risks because the issuer has control tools over the issued tokens.

How Wallets, Exchange Accounts, or Tokens Can Be Blocked

The mechanism depends on where the assets are located. If the funds are held on a centralized exchange, the platform may restrict access, trading, withdrawals, or specific operations on the account. This usually happens through internal client verification procedures, transaction analysis, and regulatory requirements.

When it comes to tokens issued by a centralized issuer, restrictions can operate at the smart contract level: the address is added to a blacklist, after which transfers to or from it become impossible. Such functions are not present in all crypto assets, but they are characteristic of a number of centralized tokens and stablecoins issued on top of major networks, including Ethereum and Tron.

The blocking can be initiated by the exchange, the token issuer, payment service, bank, court, regulator, law enforcement agencies, or sanctioning bodies. In practice, the reasons often stem from suspicions of money laundering, circumvention of sanctions, connections to hacks, fraud, dark web platforms, violations of KYC rules, or operations that do not match the client's profile.

Tax authorities and other government bodies can analyze open blockchain transactions, request information from exchanges, and match wallets to specific individuals through registration data, bank transfers, and transaction history. An address on the blockchain does not always immediately reveal its owner, but connections can emerge through exchanges, exchangers, banks, or publicly left traces.

Banks block accounts in cryptocurrency transactions based on similar logic: if a transfer appears risky, is associated with exchangers, sanctioned addresses, frequent P2P transactions, or unclear origins of funds, the bank may halt the operation and request documentation.

What to Do When Blocked and How to Reduce Risk

If cryptocurrency is blocked, the first step is to understand where the restriction occurred: on the exchange, with the token issuer, in the wallet, payment service, or bank. After that, one should contact the support of the platform or bank, request the reason for the restriction, and prepare documents that confirm the origin of the funds and the purpose of the transactions.

Keeping a history of transactions, receipts, statements, contracts, screenshots of trades, and correspondence with counterparties can be helpful. If the blockage is related to an erroneous tagging of the address or a suspicious transaction, this data can expedite the verification process. In disputes with exchanges, banks, or government agencies, it is advisable to act through official channels and not attempt to circumvent the restriction with new dubious transfers.

Reducing the risk of blockage can be achieved through basic caution: use trusted platforms, do not accept funds from suspicious addresses, avoid opaque P2P schemes, keep confirmations of the origin of funds in advance, and be cautious with stablecoins from centralized issuers. It is important to remember that control can arise not only at the blockchain level but also at the level of the exchange, bank, token issuer, or payment intermediary.

Context: Cryptocurrencies and Sanction Pressure

The topic of digital payments has become particularly sensitive for Russia in light of sanctions following its invasion of Ukraine. It was previously reported that a new cryptocurrency created for transactions circumventing restrictions conducted operations worth over $9.3 billion through a special online digital currency exchange service within four months of its launch.

In July 2024, the State Duma of the Russian Federation adopted a law in its second and third readings that legalizes cryptocurrency mining in Russia. Another episode involves the cryptocurrency exchange Grinex, which has Russian ties and is under sanctions: it suspended operations following a cyberattack during which assets worth 1 billion rubles, or $13.10 million, were stolen.