Circle CEO Defends Strict Legal Requirement for USDC Fund Freezes

Circle Internet CEO Jeremy Allaire has clarified the company's stance on the freezing of illicit funds, asserting that USDC will not be frozen without a formal legal basis. Speaking at a press conference in Seoul, Allaire emphasized that the issuer operates as a regulated financial product subject to the rule of law rather than an entity performing real-time discretionary intervention. The comments come amid intensifying criticism from blockchain analysts and industry observers. Unlike its primary competitor, Tether, which frequently blacklists funds linked to hacks within hours, Circle maintains that decisions to freeze assets should not be made at the company's discretion during the volatility of an exploit, but should instead follow formal legal processes. The debate has intensified following a suspected North Korea-linked exploit of Drift Protocol, which resulted in losses of up to $280 million, including approximately $230 million in USDC. Furthermore, blockchain researcher ZachXBT alleges that Circle's refusal to act proactively has allowed over $420 million in illicit funds to escape across more than a dozen cases since 2022. While critics argue this creates a window for attackers to move funds, some academics warn that discretionary freezes would undermine the foundations of decentralized finance. Omid Malekan of Columbia Business School argued that allowing executives to seize funds without legal mandates would replace the rule of law with corporate whim, potentially eroding trust in the broader DeFi ecosystem.