Cardano gives token issuers the power to freeze and seize holdings as Conduit sues Tether over a frozen USDT balance

The Cardano Foundation has launched CIP-0113, a standard that lets issuers of regulated tokens restrict recipients and freeze, seize or move holdings under rules they define. The standard is aimed at stablecoins, funds and bonds whose issuers need identity checks and sanctions controls built into the asset itself. A fund restricted to verified investors could reject a transfer to an unverified wallet. A stablecoin issuer could block tokens from reaching a sanctioned address.

The standard is live on mainnet after independent security audits and needed no hard fork. Issuers can update their rules as regulations change. Holders of these tokens accept that an authorized party can move their balance without their consent. Other chains already offer the same function. Ethereum has ERC-3643, a token standard for permissioned transfers. Solana has transfer controls in its token extensions. The XRP Ledger supports issuer clawback (the issuer's ability to reclaim tokens).

A court case shows how these powers work in practice. Conduit sued Tether over $2.76 million in USDT that the issuer froze in connection with an investigation in Brazil. Conduit is asking for access to the funds and damages. It is also claiming the profits Tether earned on the reserves backing the frozen tokens. Tether's public response to the specific claims does not appear in the reporting.

Tether's USDT has $184.29 billion in circulation, according to DeFiLlama, out of a total stablecoin supply of $314.99 billion.