David Schwartz, Chief Technology Officer at Ripple, publicly supported Tether’s decision to freeze $42.4 million in USDT assets prior to the receipt of a formal court warrant. The move has intensified debate over the extent of centralized control maintained by stablecoin issuers.
Lawsuit targets Tether’s asset freeze
Two Thai businessmen initiated legal action against Tether in the Southern District of New York on August 31. They allege the company blacklisted 10 Ethereum addresses containing 42,417,785.62 USDT on October 30, 2025, after being contacted by Homeland Security Investigations in an informal capacity. A formal seizure warrant for the funds only followed on February 19, 2026. The case remains unresolved in court.
Schwartz stated that Tether had limited options in the situation, emphasizing that securing the disputed funds was necessary until competing ownership concerns could be resolved. His defense is notable given Ripple’s position as an issuer of RLUSD, a rival regulated stablecoin.
Stablecoin controls and compliance power
Ripple outlines in its RLUSD terms that it reserves broad powers to freeze wallet addresses holding RLUSD in response to legal requirements or under internal compliance policies, including informal law enforcement requests. The protocol also permits RLUSD to be destroyed in one wallet and recreated in another as appropriate.
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AAPLThis approach reveals why Schwartz’s backing of Tether’s pre-emptive action appears consistent with Ripple’s own stance on regulatory compliance.
Both RLUSD and USDT are issuer-managed stablecoins. Their design allows administrative actions such as address freezing, burning, or reminting backed tokens, enabling compliance during fraud investigations, sanction enforcement, and court-ordered asset seizures.
Mini dictionary: RLUSD is Ripple’s regulated US dollar-backed stablecoin, featuring built-in controls for address freezing and reminting to meet compliance and law enforcement requests.
Ripple affirms that RLUSD wallets can be blacklisted and tokens burned or reissued if legally required or for compliance purposes, mirroring measures seen at Tether.
XRP and native asset distinctions
In contrast, Schwartz has repeatedly clarified that XRP, the native asset of the XRP Ledger, is not subject to these issuer-level controls. Documentation for XRPL distinguishes between issued tokens, which can be frozen or clawed back, and XRP itself, which remains outside such mechanisms.
According to Schwartz, Ripple can neither freeze an account holding XRP nor reverse a finalized XRP transaction. This design underscores the difference between decentralized protocols like XRP and managed stablecoins such as RLUSD or USDT.
As a result, RLUSD and XRP fulfill fundamentally different roles in the digital asset landscape and should not be considered interchangeable.
Tether’s cooperation with authorities expands
Tether has recently expanded its cooperation with law enforcement. In February, Tether assisted U.S. authorities in seizing nearly $61 million in USDT related to a pig-butchering fraud operation. The company also reported helping freeze another $344 million in April in coordination with U.S. agencies.
| Date | Amount Seized/Frozen | Context |
|---|---|---|
| February 2026 | $61 million | Pig-butchering fraud case |
| April 2026 | $344 million | US law enforcement coordination |
The outcome of the ongoing lawsuit could set a precedent for how far stablecoin issuers may go in acting upon informal government requests before the formal judicial process is completed.
Schwartz’s position highlights the critical division between stablecoins, which require administrative controls to facilitate compliance, and decentralized assets like XRP, which cannot be censored or reversed post-settlement.
