Key Points
- Stablecoin issuer Circle blocked 16 USDC wallets associated with legitimate operating businesses including exchanges and casinos
- Prominent blockchain sleuth ZachXBT condemned the action as “the single most incompetent freeze” he’s witnessed in over five years
- A sealed civil lawsuit in the United States prompted the freezes, though no details were disclosed to impacted entities
- Circle later reversed its decision on one wallet owned by Goated.com containing 130,966 USDC
- The controversy has sparked fresh discussions about centralized control over stablecoin assets and unilateral freezing powers
Earlier this week, Circle took action to freeze 16 wallets containing USDC that belonged to functioning commercial enterprises, triggering widespread backlash across the cryptocurrency sector. The affected wallets were connected to various entities including cryptocurrency trading platforms, internet-based gambling sites, and currency conversion services.
Blockchain detective ZachXBT brought the matter to public attention first. According to his analysis, the impacted businesses had no apparent connections to each other.
ZachXBT revealed that the freezing action stemmed from a sealed civil lawsuit in a United States court. Due to the confidential nature of the proceedings, affected wallet owners received no explanation for the asset freeze.
“The NY civil case is sealed and they have provided absolutely ZERO basis to freeze all of these business addresses,” ZachXBT stated on X.
He delivered scathing remarks about Circle’s approach to the situation. “In my 5+ years of investigations, it could potentially be the single most incompetent freeze I have seen,” he continued.
ZachXBT emphasized that even someone with rudimentary blockchain analysis tools could have determined within minutes that these wallets belonged to active commercial operations. Transaction histories showing thousands of entries made their business purposes abundantly evident.
Circle declined to provide statements to media inquiries from several news organizations as of press time.
Single Wallet Restored
By the following Wednesday, Circle had reversed its freeze on one of the 16 affected wallets. The wallet address “0x61f…e543” is owned by the platform Goated.com. Blockchain data from Arkham shows it currently contains 130,966 USDC.
ZachXBT indicated he anticipates additional wallets will be restored “in the near future.”
Centralized Stablecoin Authority Questioned
This episode has intensified scrutiny on the operational mechanics of centrally-issued stablecoins. Unlike physical currency or truly decentralized cryptocurrency tokens, stablecoins created by corporations such as Circle can be unilaterally frozen without advance notice.
Taylor Monahan, a security analyst at MetaMask, commented on X: “This is not the first bad freeze they’ve done. And it won’t be the last. No accountability. No responsibility. No recourse.”
Mert Mumtaz, who founded the RPC infrastructure company Helius, shared similar apprehensions. “This is your 10th reminder that centrally issued stablecoins are not actually yours; they can be frozen, unlike cash,” he posted.
Jean Rausis, who co-founded the decentralized exchange platform Smardex, suggested that the GENIUS stablecoin regulatory framework creates conditions for a privately controlled central bank digital currency system to develop.
His position was that centralized stablecoins grant their issuers identical financial monitoring and asset-freezing capabilities as traditional CBDCs.
Former United States Representative Marjorie Taylor Greene had expressed comparable views in May 2025, characterizing regulated stablecoins under the GENIUS legislation as a “CBDC Trojan Horse.”
As of Wednesday, Circle has restored access to one wallet, with ZachXBT projecting additional unfreezing actions in the coming days.
