On-chain investigator ZachXBT published the 'Circle Files' alleging that stablecoin issuer Circle has inconsistently applied its freeze powers for USDC tokens. ZachXBT claims Circle was too slow to freeze funds in 15 cases involving more than $420 million in allegedly illicit funds since 2022, while simultaneously freezing 16 operational business wallets. The allegations raise questions about Circle's compliance enforcement practices and whether its freeze powers are being applied fairly and effectively. Circle's ability to freeze wallets, once promoted as a major selling point for USDC, is now becoming a potential liability as scrutiny intensifies over how and when the company exercises this control.
ZachXBT's Allegations of Inconsistent Freeze Powers
- ▪On-chain investigator ZachXBT released allegations called the "Circle Files" regarding USDC issuer Circle
- ▪ZachXBT alleged that Circle was too slow to freeze funds in 15 cases involving more than $420 million in allegedly illicit funds since 2022
- ▪ZachXBT alleged that Circle froze 16 operational business wallets
- ▪ZachXBT alleged that Circle inconsistently applied its freeze powers for USDC
Broader Implications for Stablecoin Regulation and Trust
- ▪Circle's freeze powers are described as Circle's biggest selling point that may be becoming its biggest liability
Perspective of ZachXBT
- ▪ZachXBT's 'Circle Files' documented cases where Circle froze operational business wallets while allowing stolen funds to move freely
- ▪ZachXBT's allegations suggest Circle's freeze powers are applied inconsistently across different wallet types and situations
Perspective of Circle
- ▪Circle's freeze powers are becoming a liability after allegations of inconsistent application against legitimate businesses versus criminals
- ▪Circle's ability to freeze USDC wallets has been marketed as a key compliance feature distinguishing it from decentralized alternatives
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