Support for Tether’s Decision
David Schwartz, the former chief technology officer at Ripple, has voiced support for Tether’s decision to freeze $42.4 million in USDT without waiting for a formal court order. This raises significant discussions regarding the governance of centralized stablecoins.
The Lawsuit Background
The situation stems from a lawsuit filed in the Southern District of New York on August 31, 2025, by two Thai entrepreneurs. They allege that Tether blacklisted ten Ethereum addresses containing a total of 42,417,785.62 USDT based on an informal request from Homeland Security Investigations, prior to an official seizure warrant being issued on February 19, 2026. The legal matter remains unresolved.
Schwartz’s Perspective
Schwartz contended that Tether acted within reason, given the ambiguity surrounding ownership claims at the time. His viewpoint merits attention, especially since Ripple is a competitor with its regulated stablecoin, RLUSD, which also possesses the authority to freeze accounts. According to the terms governing RLUSD, Ripple reserves the right to block addresses holding its tokens if necessitated by legal obligations or internal policies, including responses to law enforcement inquiries.
Furthermore, the terms allow for token burns and minting under specific circumstances, thereby framing Schwartz’s defense of Tether within a consistent practice in the industry.
Comparative Analysis of Stablecoins
Both USDT and RLUSD rely on backing from their issuers, and their compliance with sanctions or legal repercussions hinges on maintaining administrative authority. Previous analyses of RLUSD have shed light on its security-oriented architecture along with features such as the clawback mechanism inherent in XRP Ledger (XRPL).
However, it is crucial to distinguish between XRP, the native asset of XRPL, and stablecoins like RLUSD. While the features that enable freezing and reclaiming funds apply specifically to issued tokens, XRP transactions are immutable once confirmed, thereby reinforcing the notion that Ripple cannot intervene on transactions of XRP.
Implications of the Tether Lawsuit
The current Tether lawsuit corresponds with an increase in cooperation from Tether with law enforcement; in February, the company revealed it assisted in the seizure of approximately $61 million in USDT linked to fraud investigations and disclosed an additional freeze of $344 million in April.
This legal case has implications that extend beyond Tether itself. A court ruling could significantly clarify the extent of authority that stablecoin issuers have in enacting immediate measures upon law enforcement requests before any judicial action.
Conclusion
For stakeholders in XRP, Schwartz’s support for Tether emphasizes the functional distinctions between XRP and Ripple’s RLUSD, underscoring that they operate within the same digital asset landscape yet serve different purposes.
