Stablecoin issuer Circle, the company behind the dollar-pegged token USDC, has been accused of improperly freezing 16 cryptocurrency wallets linked to a civil legal proceeding in the United States. The allegation comes from onchain investigator and security researcher ZachXBT, who says the affected wallets had no apparent connection to the case in question. The wallets reportedly belonged to crypto exchanges, online casinos, and foreign currency exchange businesses.
ZachXBT stated that even an analyst using basic tools could have determined within minutes that the wallets were operational business accounts, given the volume of transactions they routinely process. In a separate post, he noted that the underlying legal case is sealed and argued that Circle had no valid grounds to freeze the tokens. Cointelegraph reached out to Circle for comment but had not received a response by the time of publication.
The incident has reignited debate over the nature of centralized stablecoins and their compatibility with the foundational principles of cryptocurrency. Critics argue that the ability of issuers to freeze tokens contradicts the permissionless and censorship-resistant qualities that cryptocurrencies are meant to provide. The freeze has drawn responses from several figures across the crypto industry.
Mert Mumtaz, founder of remote procedure call node provider Helius, used the situation to issue a pointed reminder that centrally issued stablecoins remain under the control of their issuers and can be frozen at any time, unlike physical cash. His comments reflect a broader concern among crypto advocates about the risks of relying on centralized token infrastructure. The episode has amplified calls for alternatives that operate without a central authority capable of intervening in user funds.
Jean Rausis, co-founder of the decentralized trading platform Smardex, argued that the situation illustrates a deeper structural issue with regulated stablecoins. He said that centralized stablecoins effectively grant issuers the same financial surveillance and asset-freezing capabilities associated with a central bank digital currency, or CBDC. Rausis also pointed to provisions within the GENIUS stablecoin regulatory framework as laying the groundwork for a privately managed CBDC to emerge.
Former US lawmaker Marjorie Taylor Greene had previously raised similar concerns in May 2025, describing regulated stablecoins under the GENIUS bill as a CBDC Trojan Horse. Her warning aligns with the concerns now being voiced in response to the Circle wallet freezes. The convergence of these perspectives suggests growing unease about the long-term implications of centralized stablecoin governance for financial freedom and privacy.
Originally reported by CoinTelegraph.
