Circle has clarified that it cannot unilaterally freeze USDC without a legal order, responding to recent criticism over its handling of funds tied to exploits like the $270 million drain from Drift Protocol. In a blog post published April 10, the stablecoin issuer argued that its ability to blacklist assets is “not discretionary” and depends on authorities. The company is calling for updated regulatory frameworks to address the gap between blockchain speed and traditional legal processes.
Circle has addressed criticism regarding illicit fund flows, stating it lacks the discretion to freeze USDC assets without legal authorization. The company made these remarks in a blog post on April 10 following scrutiny tied to the Drift Protocol exploit.
Circle said its ability to freeze USDC is “not discretionary,” but instead requires lawful orders from authorities. This statement comes after an on-chain report alleged over $420 million in compliance lapses linked to delayed freezes.
The company pushed back on the idea it can act unilaterally, noting USDC operates within U.S. and European regulatory frameworks. It stated that freezing requires a formal legal process to avoid undermining property rights.
The clarification follows criticism related to the April 1 exploit of Drift Protocol, where over $270 million was reportedly drained. Reports claimed more than $230 million in USDC was bridged across chains during the incident without being frozen.
The report also cited past incidents including Cetus, Mango Markets, and Nomad where USDC-linked funds were allegedly frozen late or not at all. Circle’s response reframed the issue as a legal constraint rather than an operational failure.
A key theme is a “mismatch between the speed of blockchain activity and the pace of legal processes.” The company argues current frameworks do not allow for rapid action without due process.
Circle explicitly linked the issue to ongoing U.S. regulatory efforts, including the GENIUS Act and the CLARITY Act. It called for updated legal frameworks to enable faster intervention while preserving rights.
The timing is notable given recent signals from U.S. officials. A White House report has also challenged restrictions on stablecoin yield, suggesting growing policy alignment.
