Circle Internet (CRCL) CEO Jeremy Allaire has offered his clearest public response yet to growing criticism of 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 real-time intervention tool.
“Circle has a very, very clear performance obligation under the law,” Allaire said. “Circle respects the rule of law and we are able to take actions such as freezing a wallet upon order of law enforcement or the courts.”
Allaire presented 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 the moment, but rather follow law enforcement requests or court orders. This approach reflects Circle’s broader strategy to align closely with regulators and institutions.
Rival Tether, the issuer of the world’s largest stablecoin, USDT, has a more proactive approach. The company repeatedly froze funds linked to hacking and illicit activities within hours. In several cases cited by blockchain detective ZachXBT, including exploits affecting Ledger and Remitano, Tether blacklisted stolen funds while the equivalent USDC remained intact.
Allaire’s remarks come at a time of growing interest in the issue. Earlier this month, Drift Protocol suffered an alleged North Korea-related exploit that resulted in losses of up to $280 million. Around $230 million in USDC was transferred between chains over several hours. The incident has become a focal point for critics who say Circle is failing to act despite having the technical capacity to do so.
The procedure also carries risks
ZachXBT is among the loudest. In a widely circulated thread on X, he said Circle’s inaction in more than a dozen cases since 2022 contributed to the leak of more than $420 million in illicit funds. He highlighted 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 this trend highlights a deeper problem. USDC is issued centrally and contains controls that allow Circle to block addresses. However, these powers are rarely used in real time. They say by relying on legal processes that move much more slowly than blockchain transactions, Circle creates a loophole that attackers can exploit.
Others in the industry argue that faster intervention carries its own risks. Omid Malekan, assistant 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 control points, Malekan said.
“If Circle and other stablecoin issuers implement an arbitrary freeze or seize functions beyond what the law requires, then not only is the code not law, but the law is also not law,” he wrote on X. “Instead, what a single executive of a single company decides is the law.”
