David Schwartz, Ripple’s CTO Emeritus better known as JoelKatz, has challenged the idea that a stablecoin can refuse to freeze funds and still function as a true stablecoin. Responding on X to Columbia Business School professor Omid Malekan, Schwartz said the foundation of a stablecoin is the issuer’s legal obligation to redeem it for fiat. A court order can alter or dissolve that obligation, and once that happens, the core reason for holding the token starts to break down.
Legal redeemability clashes with freeze resistance
Malekan’s argument was that stablecoin issuers look increasingly similar, so a product that refuses to freeze or seize funds and pushes neutrality to the edge of what the law allows could become a powerful go-to-market strategy. His case rested on demand from DeFi users and many retail holders who prefer censorship resistance, a feature no major issuer currently offers.
Schwartz answered from the legal side rather than the technical one. He wrote that the point of a stablecoin is that it represents a legal redemption claim against the issuer, and court orders affect legal obligations by definition. His conclusion was blunt: if that redemption promise can no longer operate under legal reality, the asset loses the very property that gives it value. In that framing, freeze resistance and enforceable redeemability are not easily compatible.
Circle’s recent actions made the debate harder to ignore
The timing gave the exchange extra weight. According to the source material, on March 23, Circle froze 16 active business wallets under a sealed U.S. civil court order. On-chain investigator ZachXBT called it “potentially the single most incompetent freeze” in more than five years of investigations, saying even an analyst with basic tools could have identified those addresses as operational business wallets within minutes.
MetaMask security researcher Taylor Monahan also criticized Circle on X, saying this was not the first bad freeze and would not be the last, while pointing to a lack of accountability, responsibility, and recourse.
Then the criticism flipped direction. On April 1, during the $285 million Drift protocol hack, USDC reportedly moved through Circle’s own cross-chain infrastructure without intervention, drawing a fresh wave of complaints. One incident raised accusations of freezing the wrong wallets. The other raised accusations of not freezing at all. That tension pushed the discussion beyond whether issuers should hold freeze powers and toward whether they have a coherent process for using them.
The GENIUS Act has already closed part of the door
The report notes that the GENIUS Act, now signed into law, requires stablecoin issuers to maintain the technical ability to freeze funds when legally required. That means the fully neutral stablecoin imagined by Malekan is not legally viable in the United States today.
Schwartz’s comments bring the issue back to execution. The harder question is no longer just whether freeze powers should exist, but whether issuers can apply them in a clear and consistent way. After the past ten days, that remains unresolved.