Circle CEO Jeremy Allaire stated the company only freezes USDC when there is a formal legal basis. He emphasized that Circle treats USDC as a regulated financial product operating under the rule of law, not as a tool for intervention based on public pressure or the movement of stolen funds on-chain.
Allaire explained that Circle has a clear legal obligation to act solely upon direction from courts or law enforcement. This stance differentiates USDC from a tool for discretionary intervention during fast-moving exploits, reinforcing that freeze decisions must adhere to formal legal processes.
Circle previously indicated it freezes USDC only under legal compulsion and used the recent controversy to advocate for the GENIUS Act and CLARITY Act, arguing for a clearer legal framework for stablecoin issuers.
Criticism intensified after the Drift Protocol exploit on April 1, which resulted in losses of approximately $285 million, including around $230 million in USDC. Analysts noted the attacker moved USDC across chains over several hours, a period critics argued Circle could have used to freeze assets before further laundering.
On-chain investigator ZachXBT has claimed Circle's delays in freezing wallets have contributed to significant illicit USDC flows since 2022.