USDCircle scrutinized over USDC freezes as cirBTC plans advance
ZachXBT allegations and Drift exploit response timeline draw industry attention
TL;DR
- ZachXBT said Circle failed to freeze about $420 million in illicit USDC since 2022.
- A 6-hour delay during the $280 million Drift exploit allowed $232 million to be bridged out.
- Circle is preparing cirBTC, a wrapped Bitcoin token backed 1:1 by BTC.
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Circle is facing scrutiny after on-chain investigator ZachXBT said the company failed to freeze about $420 million in illicit USDC flows since 2022, including 15 hack and fraud cases where the stablecoin issuer either took minimal action or did not act.
ZachXBT said Circle has the ability to freeze funds and blacklist wallets but repeatedly failed to act before assets were bridged or converted. The investigator added that only a small fraction of illicit funds were frozen, with action often occurring after legal processes or after assets had already moved beyond recovery.
Drift exploit exposed response gap
ZachXBT said Circle “was too slow to freeze USDC after the Drift Protocol exploit,” while the attacker still held some of the funds. During that period, assets were moved across chains using Circle’s Cross-Chain Transfer Protocol, allowing large amounts of USDC to exit before intervention.
ZachXBT wrote, “$420M+ in alleged compliance failures since 2022, including fifteen cases of the US-regulated stablecoin issuer taking minimal action against illicit funds.” The statement described a pattern of delayed or limited enforcement across multiple incidents.
Criticism centered on the speed of response, with comparisons showing that Tether froze related assets faster and recovered part of the funds that might otherwise have been lost.
Circle expands into wrapped Bitcoin with cirBTC
Circle is also preparing to launch cirBTC, a wrapped Bitcoin token backed 1:1 by BTC. The company said cirBTC is designed to provide institutions with “a highly secure and neutral version of wrapped BTC.”
The token will integrate with Circle’s existing infrastructure, including Circle Mint and the Arc blockchain, and will launch first on Ethereum mainnet and Arc. Circle Mint is used for issuing and redeeming USDC and EURC, placing cirBTC within the same operational system.
FAQ
What did ZachXBT say about Circle?
Circle failed to freeze about $420 million in illicit USDC since 2022.
What happened during the Drift exploit?
A 6-hour delay allowed $232 million to be bridged out.
What is cirBTC?
A wrapped Bitcoin token backed 1:1 by BTC.
Where will cirBTC launch?
Ethereum mainnet and the Arc blockchain.
This article has been refined and enhanced by ChatGPT.
