In response to increasing criticism regarding Circle Internet Financial’s (CRCL) management of illicit funds, CEO Jeremy Allaire clarified the company’s position on freezing wallets during a press conference in Seoul. He emphasized that Circle will not freeze USDC wallets without a formal legal directive.
Allaire described USDC, the second-largest dollar-pegged stablecoin, as a regulated financial instrument rather than a tool for immediate intervention. “Circle adheres strictly to legal obligations,” Allaire stated. “We act in accordance with law enforcement or court directives when freezing wallets.”
He positioned USDC within the traditional financial system framework, subject to regulatory oversight and legal processes. According to him, decisions such as blacklisting or freezing funds should follow formal requests from authorities rather than company discretion during exploits.
This approach contrasts with Tether’s strategy, which actively freezes funds associated with hacks or illicit activities swiftly. For instance, blockchain analyst ZachXBT noted that in several incidents, including those affecting Ledger and Remitano, Tether blacklisted stolen assets while equivalent USDC transactions went unfrozen.
Allaire’s stance emerges amid heightened scrutiny after a suspected North Korea-linked exploit at Drift Protocol led to approximately $280 million in losses, with around $230 million in USDC being transferred across chains. Critics argue that Circle’s technical capability to act was not utilized effectively.
ZachXBT has been particularly outspoken, highlighting over a dozen instances since 2022 where more than $420 million in illicit funds were not frozen by Circle. He cited cases like those involving Cetus, SwapNet, and Nomad, where stolen USDC remained accessible for extended periods.
Critics assert that although USDC is centrally controlled with capabilities to block addresses, the reliance on slower legal processes creates vulnerabilities for attackers.
Conversely, industry voices caution against rapid interventions. Omid Malekan of Columbia Business School warned against granting issuers discretionary powers beyond legal boundaries, as it could undermine decentralized finance (DeFi) by introducing centralized control points. “Allowing arbitrary freezes or seizures would mean the law is defined not by statutes but by corporate executives,” he stated on X.