ZachXBT claims Circle wrongfully freezing exchange wallets

Stablecoin issuer Circle, the company behind the $USDC ($USDC) dollar-pegged token, wrongfully froze 16 wallets in connection with an ongoing civil legal case in the United States, according to onchain investigator and security researcher ZachXBT.

The wallets in question belonged to crypto exchanges, online casinos and foreign currency exchange businesses, which “do not appear related at all,” ZachXBT said.

“An analyst with basic tools could have identified, within minutes, that these were operational business wallets from the thousands of transactions they process,” he said

Source: ZachXBT

In a separate social media post, the onchain investigator wrote that the case is “sealed,” and Circle had “zero basis” to freeze the fiat-pegged tokens. He added:

“In my 5-plus years of investigations, it could potentially be the single most incompetent freeze I have seen. This is what happens when you outsource your freezing decisions to literally any random federal judge instead of having a process.”

Cointelegraph sought comment from Circle about the claims but did not obtain a response by the time of publication.

A simplified illustration of the $USDC wallets frozen by Circle. Source: ZachXBT

Centralized stablecoins can be frozen by the issuer, which goes against the core value proposition of cryptocurrencies as permissionless, censorship-resistant assets, critics of the technology say.

Crypto executives warn that regulated stablecoins are gateway to CBDCs

“This is your 10th reminder that centrally issued stablecoins are not actually yours; they can be frozen, unlike cash,” Mert Mumtaz, founder of remote procedure call (RPC) node provider Helius, said in response to the $USDC wallet freezes.

Jean Rausis, co-founder of the Smardex decentralized trading platform, said that provisions in the $GENIUS stablecoin regulatory framework laid the groundwork for a privately managed central bank digital currency (CBDC) to emerge.

Centralized stablecoins effectively give the issuer the same financial surveillance and asset freezing capabilities that a standard CBDC would provide, he said.

Former US lawmaker Marjorie Taylor Greene echoed Rausis’s warning in May 2025, arguing that regulated stablecoins under the $GENIUS bill are a “CBDC Trojan Horse.”