Circle Internet CEO Jeremy Allaire offered his clearest defense yet of the stablecoin issuer's approach to illicit funds during a press conference in Seoul. “Circle has a very, very clear performance obligation under the law,” Allaire said. “Circle follows the rule of law, and we are able to undertake actions such as freezing a wallet at the direction of law enforcement or the courts.” He framed USDC as part of the traditional financial system, subject to legal process rather than real-time corporate discretion.
Tether's Rapid Response Stands Out
The stance contrasts sharply with rival Tether, issuer of USDT. On-chain sleuth ZachXBT documented multiple cases over the years—including hacks affecting Ledger and Remitano—where Tether blacklisted stolen funds within hours while equivalent USDC remained untouched. The discrepancy has fueled criticism that Circle's legal-first approach leaves a gap attackers can exploit.
Drift Protocol Hack Sparks Outrage
Earlier this month, Drift Protocol suffered a suspected North Korea-linked exploit that drained $280 million, with roughly $230 million in USDC moved across chains over several hours. The incident became a rallying point for critics who argue Circle has the technical ability to freeze but chooses not to act quickly.
ZachXBT: Inaction Cost Over $420M
In a widely shared thread on X, ZachXBT said Circle's failure to freeze in more than a dozen cases since 2022 had allowed over $420 million in illicit funds to escape. He pointed to exploits at Cetus, SwapNet, and Nomad where stolen USDC sat in identifiable wallets for hours or days without action. Critics argue that deferring to slow legal processes while blockchain transactions move at lightning speed effectively creates a window for attackers.
Intervention Risks: Arbitrary Freezes Could Undermine DeFi
Not everyone wants faster corporate intervention. Columbia Business School adjunct professor Omid Malekan warned that giving stablecoin issuers discretionary freeze power beyond legal requirements would erode trust in decentralized finance. “If Circle and other stablecoin issuers implement arbitrary freeze or seize functions beyond what the law requires, then not only is code not law, but also law is not law,” he wrote on X. “Instead what a single executive inside a single corporation decides is law.” The comment underscores a fundamental tension: acting fast risks centralizing control, while waiting for legal orders risks enabling theft.