on-chain investigator ZachXBT accuses Circle of wrongly freezing wallets belonging to online exchanges and casinos, sparking debate about the risks of centralized control in stablecoins.
on-chain investigator ZachXBT alleges that Circle , the issuer of the USDC stablecoin, mistakenly froze 16 wallets as part of an ongoing civil lawsuit in the United States.
The affected wallets belong to cryptocurrency exchanges, online casinos, and foreign exchange businesses that, according to ZachXBT , "have no connection to each other" and could be easily identified as operating business wallets within minutes using basic analytics tools, based on the thousands of transactions they process. Circle did not respond to a request for comment at the time of publication.
ZachXBT described this as the “most incompetent freezing decision” he had seen in over five years of investigation, pointing to the root cause: the case was in a “sealed” state, and Circle had delegated the freezing decision-making authority to a federal judge instead of establishing its own internal due diligence process. According to him, Circle “had no basis” to freeze the fiat- Peg Token in this case.
The incident amplified the debate about the centralized nature of stablecoins.
The incident immediately sparked a deeper debate about the line between legal compliance and centralized control. Mert Mumtaz, founder of RPC node provider Helius, stated that this was a “tenth reminder” that centrally issued stablecoins do not truly belong entirely to their holders and can be frozen at any time, a fundamental difference from physical cash.
This is precisely the point where critics have long argued that it goes against the core values of crypto assets: permissionlessness and censorship resistance.
The incident also raised policy concerns related to the GENIUS bill, the regulatory framework for stablecoins currently under discussion in the US. Jean Rausis, co-founder of the decentralized trading platform SmarDex, argued that the regulations within the GENIUS framework essentially lay the groundwork for a privately operated form of central bank digital currency, giving the issuer the ability to monitor finances and freeze assets similar to CBDCs.
Former Congresswoman Marjorie Taylor Greene issued a similar warning in May 2025, calling the GENIUS-regulated stablecoin the “Trojan horse of CBDCs.” With Circle preparing for an IPO and facing competitive pressure from Tether, this accidental freeze raises a difficult question: can a legally compliant stablecoin simultaneously ensure neutrality and lack of censorship?
