Circle Internet (CRCL) CEO Jeremy Allaire offered his clearest public response yet to growing criticism over how the stablecoin issuer handles illicit funds, saying it does not freeze wallets unless there is a formal legal basis to do so.
Speaking on stage at a press conference in Seoul, Allaire positioned USDC, the second largest dollar-pegged stablecoin, as a regulated financial product rather than a tool for real-time intervention.
“Circle has a very, very clear performance obligation under the law,” Allaire said. “Circle follows the rule of law, and we are able to take actions such as freezing a wallet at the direction of law enforcement or the courts.”
Allaire framed the USDC as part of the traditional financial system, subject to legal process and oversight. Decisions to blacklist or freeze funds, he suggested, should not be made at the company’s discretion in the heat of an exploit, but instead follow requests from law enforcement or court orders. The move reflects Circle’s broader strategy to align closely with regulators and institutions.
Rival Tether, the issuer of the world’s largest stablecoin, USDT, takes a more proactive approach. The company has repeatedly frozen funds associated with hacking and illegal activity within hours. In several cases cited by blockchain practitioner ZachXBT, including exploits affecting Ledger and Remitano, Tether blacklisted stolen funds while corresponding USDC remained untouched.
Allaire’s remarks come at a time of increasing scrutiny. Earlier this month, Drift Protocol suffered a suspected North Korea-linked exploit that resulted in losses of up to $280 million. About $230 million in USDC was moved across chains over several hours. The incident has become a focal point for critics who argue that Circle is failing to act despite having the technical ability to do so.
Intervention also carries risks
ZachXBT is among the most vocal. In a widely circulated thread on X, he said that Circle’s inaction across more than a dozen cases since 2022 has contributed to the escape of over $420 million in illegal funds. He pointed to several incidents where stolen USDC remained in identifiable wallets for hours or even days without being frozen, including exploits affecting Cetus, SwapNet and Nomad.
Critics say the pattern highlights a deeper problem. USDC is issued centrally and contains controls that allow Circle to block addresses. Yet these powers are rarely used in real time. By delaying legal processes that move far more slowly than blockchain transactions, they argue, Circle creates a loophole that attackers can exploit.
Others in the industry argue that faster intervention carries its own risks. Omid Malekan, an adjunct professor at Columbia Business School, responded to calls for discretionary freezes by warning that allowing issuers to act beyond legal requirements would undermine the foundations of decentralized finance (DeFi).
Such powers could erode trust in DeFi systems by introducing centralized checkpoints, Malekan said.
“If Circle and other stablecoin issuers implement arbitrary freezes or seizures of functions beyond what the law requires, then not only is code not law, but law is not law,” he wrote on X. “Instead, what a single director of a single company decides is law.”
