Why is my USDT frozen — and what a broker must do when a client's deposit is frozen
A Tether freeze is a flag inside the token contract, not a court order and not a sanctions listing. Here is what it is, how to read it, and what the receiving institution should do next.
"My USDT is frozen" usually means one thing: Tether has added the address to the blacklist inside its own USDT contract. The tokens still show in the balance, but the contract refuses to move them. This guide explains what that flag is, why it is not the same as a sanctions designation, and what a broker or payment institution should do when a client's deposit — or the client's wallet — turns out to be frozen.
On this page
What a Tether freeze is
A boolean in the official USDT contract; the contract rejects transfers from a listed address.
Tether's USDT contracts on Ethereum, Tron and Avalanche carry an owner-controlled blacklist. The public read function is isBlackListed(address); it returns true or false. When it returns true, the contract rejects any transfer sent from that address, so the balance cannot be moved by the holder. The contract owner can additionally destroy a blacklisted balance. Circle's USDC contracts have an equivalent function, isBlacklisted(address), with the same effect.
Tether adds addresses at the request of law enforcement, in response to court orders and hacks, and under its own compliance programme. Nothing is announced per address; the only authoritative source is the contract itself. That is why KYTGate reads the flag live from the official contract for every screening rather than relying on a cached label.
Only the official contract counts. A token that merely calls itself "USDT" on another chain — a bridged or Binance-Peg variant, for example — has no issuer blacklist function at all. See the official contract list for which contracts KYTGate reads.
How a freeze differs from a sanctions listing
A freeze is a private issuer action; a sanctions listing is a government designation with legal duties attached. Neither implies the other.
A sanctions listing is a designation by a government body — OFAC, UK OFSI, the EU — that creates legal obligations for you: asset freezing, reporting, no dealings. An issuer freeze is a private company acting on its own contract. It carries no legal designation, and there is no public list to check against; the contract is the list.
The two overlap only partly. Many sanctioned addresses hold no stablecoins and are never frozen. Many frozen addresses are not on any sanctions list — they were flagged after a hack, a scam report, or a request from a police force. So a "not frozen" answer says nothing about sanctions, and a "no sanctions match" says nothing about a freeze. KYTGate reports the two as separate coverage dimensions, sanctions and issuerFreeze, and never folds one into the other.
What they share is evidential weight. Under KYTGate's baseline policy both are hard signals: a sanctions match or an issuer freeze on the counterparty produces BLOCK_PENDING_MLRO, opens a case, and holds the funds for the MLRO. Nothing is auto-returned.
The three situations a broker actually meets
The sender is frozen before sending, frozen after the deposit arrived, or your own receiving address is frozen.
- The client's wallet was frozen before they sent. The transfer never happens; the client sees a failed transaction and asks you why. There is nothing to credit and nothing to hold — but the client has just told you their wallet is on Tether's blacklist, and that belongs in the customer file before any other deposit from them is accepted.
- The deposit arrived, and the sending address is frozen now. The tokens moved before the freeze, so you hold funds whose source Tether has since flagged. This is the case that needs a documented decision: whether the funds are credited, held or returned, and on what evidence.
- Your own receiving address is frozen. Rare, but existential: every USDT in it is stuck, including other clients' deposits. Treat it as an incident, not a case; contact the issuer through counsel and stop routing deposits to that address immediately.
What the receiving institution should do
Do not credit, open a case, ask the client through a remediation link, document, escalate to the MLRO, and decide on an STR.
- Do not credit the ledger. A frozen counterparty is a hard signal; crediting first and asking later leaves you explaining a payout, not a hold. KYTGate's decision for this case is BLOCK_PENDING_MLRO, and in enforce mode that means hold the funds.
- Open a case with the evidence attached. The case should record what was read (the contract, the method, the chain), when, and the sanctions snapshot in force at the time. KYTGate opens the case automatically on the non-ALLOW decision and stores the signed Decision Receipt with it.
- Ask the client — through a link, not an argument. A one-time remediation request can ask for an exchange withdrawal receipt, a source-of-funds explanation, or a wallet-ownership signature. The client sees your company name and a checklist, never the case or the decision. Answers land on the case timeline.
- Document what you did and why. The reviewer's notes, the client's answer, and the final outcome (credited, returned, refused) are what an examiner asks for. Closing a KYTGate case requires a recorded outcome: RELEASE, REJECT or NO_ACTION.
- Escalate to the MLRO. A release of funds on a BLOCK_PENDING_MLRO decision is an MLRO override: allowed, four-eyes enforced, and labelled as such on the receipt, the evidence pack and the webhook. It is never a reviewer's private decision.
- Consider whether a report is due. A freeze is not proof of a crime, but it is often the visible end of an investigation. Whether to file a suspicious transaction report is the MLRO's judgement under your jurisdiction's rules — KYTGate drafts the factual bundle (addresses, hashes, timeline, coverage, receipt) and leaves the reasons-for-suspicion section empty for the MLRO to write. When in doubt, check with counsel.
How KYTGate reads freezes and shows them
Live isBlackListed / isBlacklisted read on every screening; the result is a coverage dimension and, when true, a severity-100 signal.
On every screening — deposit, withdrawal, wallet registration, re-screen — KYTGate calls the issuer blacklist function on each canonical USDT and USDC contract for that chain, over public RPC. The result is recorded as the issuerFreeze coverage dimension: COMPLETE when the read succeeded, MISSING when the RPC could not answer (the decision is then TECHNICAL_HOLD, never a silent pass), and UNSUPPORTED on chains with no canonical issuer contract, such as BNB Chain.
A true answer becomes a signal with category issuer_blacklist, severity 100, provider issuer:tether or issuer:circle, and a summary naming the token and chain. The signed Decision Receipt keeps that signal and the coverage matrix, so the state you acted on can be shown later even if the address is unfrozen afterwards. Registered wallets are re-read every 6 hours and after every sanctions list change; a freeze or unfreeze on a registered wallet emits a wallet.state_changed webhook and a case.
The same read is available without an account on the free USDT blacklist check and Tron USDT blacklist check; each result shows the contract, the method and an explorer link so you can verify it yourself.
Questions
Why is my USDT frozen?
Because Tether has added your address to the blacklist inside its USDT contract. The public function isBlackListed(address) returns true for it, and the contract refuses transfers sent from the address. Tether does this at the request of law enforcement, after hacks and scam reports, and under its own compliance programme; it does not announce individual freezes.
Is a frozen USDT address the same as a sanctioned address?
No. A sanctions listing is a government designation (OFAC, UK OFSI, EU) with legal obligations attached. A freeze is a private action by the issuer on its own contract. Many frozen addresses are on no sanctions list, and many sanctioned addresses are never frozen. KYTGate reports them as two separate coverage dimensions.
Can a broker credit a deposit that came from an address that is now frozen?
The tokens already moved, so technically you hold them. Whether to credit, hold or return them is a compliance decision that should be taken with the evidence on file and, for a release, by the MLRO. Under KYTGate's baseline policy the decision is BLOCK_PENDING_MLRO, a case opens, and a release is recorded as a four-eyes MLRO override.
Does a freeze mean we must file a suspicious transaction report?
Not automatically. A freeze is a strong indicator, not proof of a crime. Whether a report is due depends on your jurisdiction and on what the MLRO concludes from the file; check with counsel. KYTGate prepares a factual STR/SAR draft from the case and leaves the reasons-for-suspicion section for the MLRO to write.
How does KYTGate know an address is frozen?
It calls the blacklist function on the official USDT and USDC contracts live, over public RPC, on every screening, and records the answer inside the signed Decision Receipt. If the read cannot complete, coverage is MISSING and the decision is TECHNICAL_HOLD rather than a pass.