The whole thing is very recent, and the ecosystem is not very mature or developed (i.e. hardly any lightning wallet supports transfering taproot assets). But taproot was enabled in 2021, and Tether announced a taproot stablecoin as early as January 2025: https://tether.io/news/tether-brings-usdt-to-bitcoins-lightn...

I am not deep enough into the tech complexity, but AFAIK the token on TAP is traceable by the owner, just as bitcoin is. While not on-chain, the proof file that the new owner gets during transfer includes the full history and lineage of that token.

I.e. the moment you want to exchange the stablecoin token for the underlying asset (being it fiat USD, gold or whatnot) the stablecoin issuer can refuse to do that exchange for whatever grounds they have - probably based on regulation. So if a sanctioned entity (russia, iran) owned that token before, it is in the history and the stablecoin issuer can refuse to swap.

BUT: Good luck tying the public keys to real-world entities like russian goverment. Other than on-chain with bitcoin, you would only revel the public key if you traded with that entity, and are part of the lineage. The keys are not revealed to the entire world.

Plus, this also does not prevent fungibility of the token, you can still transfer the token to whatever other wallet you like, selling it to someone who does not care/check if it is tainted.