Circle Faces Backlash After Allegedly Freezing Unrelated Crypto Wallets
- Circle froze USDC balances in 16 business hot wallets on March 23 in connection with a sealed US civil case, affecting crypto exchanges, online casinos, and forex platforms with no apparent link to each other.
- Blockchain investigator ZachXBT called it potentially “the single most incompetent freeze” in his five-plus years of investigations, noting the wallets processed thousands of transactions and were clearly operational.
- Circle’s stock dropped 25% to US$100 following the news, while industry figures warned that centralised stablecoins give issuers the same asset-freezing power as a central bank digital currency.
Stablecoin giant Circle recently froze USDC balances in 16 business hot wallets in connection with a sealed US civil court case, cutting off funds used by exchanges, casinos, and forex platforms including Pepperstone, FXPro, Goated.com, and 500 Casino.
The affected wallets were described as operational business accounts processing large volumes of transactions.
Blockchain investigator ZachXBT said the wallets could have been identified quickly as routine treasury infrastructure and argued Circle had no clear basis to freeze them.
The action left the wallets unable to move funds, disrupting vendor payments, customer withdrawals, and trading obligations. The businesses were not given an appeal window or automatic notice before the freeze, according to the information provided.
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Circle Responds, Stock Slides
Circle chief executive Jeremy Allaire addressed the issue during a March 23 webcast, saying the company remains focused on regulatory compliance and consumer protection while trying to balance legal obligations with decentralisation principles. Circle issued a short statement on March 24 confirming it was cooperating with US authorities but did not provide details about the sealed case.
The market reaction was immediate. Circle’s stock fell 25% in early trading, dropping from US$126 (AU$180) to US$100 (AU$143). The Blockchain Association called for more disclosure on how the company decides when and how to freeze assets.
The incident renewed criticism of centralised stablecoins and the control issuers retain over user funds.
Helius founder Mert Mumtaz said the freeze showed that centrally issued stablecoins can be blocked in ways cash cannot.
Circle has previously frozen about US$110 million (AU$157 million) in USDC across fewer than 500 addresses. That is far below Tether’s roughly US$1.6 billion (AU$2.29 billion) across more than 2,500 addresses.
ZachXBT also pointed to inconsistency in Circle’s enforcement, noting that weeks earlier he had criticised the company for acting too slowly to freeze US$3 million (AU$4.29 million) in stolen USDC linked to SwapNet users.
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The post Circle Faces Backlash After Allegedly Freezing Unrelated Crypto Wallets appeared first on Crypto News Australia.
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