Circle Faces Criticism Over Stolen USDC
Circle, the company behind the USDC stablecoin, has come under fire from the crypto security community due to its inaction regarding over $3 million in stolen USDC that remained unfrozen for several hours following a theft linked to users of the SwapNet platform. A post gaining traction on X has drawn attention to the fact that the stolen funds were still accessible at the original theft address on the Base network for over eight hours, raising questions about Circle’s willingness to initiate measures without a U.S. court order. The post provocatively questioned whether Circle would act in time to save an individual’s retirement savings or if they would require confirmation for what could be deemed verifiable with public blockchain data.
Criticism from Blockchain Investigators
Prominent blockchain investigator ZachXBT added to the criticism by labeling Circle as a “bad actor” and suggesting that their approach towards safeguarding users diminishes confidence in USDC, a centralized stablecoin.
He voiced concerns about why developers would choose to work with USDC given the company’s track record of failing to support its clients during emergencies. In his observations, he also noted the $13 million in USDC that was compromised during the hack of SwapNet just prior to the unresolved theft of $3 million.
Centralized Stablecoin Obligations
This recent incident has reignited discussions about the obligations of centralized stablecoin issuers, particularly in the wake of security breaches. Unlike decentralized cryptocurrencies, centralized stablecoins like USDC and Tether (USDT) possess the unique ability to freeze assets, a feature often promoted as a security measure against theft. Analysts point out that hackers usually try to quickly convert frozen assets into other cryptocurrencies, such as DAI or Ethereum (ETH), before laundering them via services like Tornado Cash.
Critics argue that Circle’s delay in freezing the assets poses a heightened risk of the stolen funds being moved or laundered securely, even though their location remains publicly traceable on the blockchain.
Circle’s Track Record and Comparisons
Founded in 2013 and based in Boston, Circle has positioned USDC as a fully backed and regulated stablecoin, advocating for its integration with both regulators and traditional finance. However, Circle’s history of perceived slowness or inconsistency in enforcement has attracted scrutiny.
The crypto community has voiced concerns following previous incidents, including a $42 million exploit on the GMX platform, as well as instances of funds stolen by North Korean-affiliated hackers from exchanges like Bybit. In stark contrast, competitor Tether has successfully frozen approximately $1.6 billion in USDT across over 2,500 addresses, while Circle has reportedly frozen around $110 million in USDC across less than 500 addresses, according to a Dune Analytics report maintained by AMLBot.
