Circle freezes exchange wallets without authorization… sparking controversy over stablecoin control

Controversy has erupted over Circle’s wallet-freezing measures.

According to Cointelegraph on the 25th (local time), Circle froze 16 wallets in connection with a civil lawsuit in the United States, and debate within the industry continues over whether the action was appropriate.

The frozen wallets are said to be operational wallets used by a crypto exchange, an online casino, and a foreign-exchange services provider, among others. Some have also raised the possibility that these wallets may not be directly related to the case.

On-chain analyst ZachXBT said, “Even a basic analysis can confirm that these wallets are operational wallets,” adding that “this freeze lacks sufficient grounds.”

He further argued that “this could be the most incompetent freeze case” in his investigative experience, raising questions about the freezing process itself.

The case is once again highlighting the structural characteristics of centralized stablecoins. Because stablecoin issuers can control specific wallets or freeze assets, debate has long persisted over decentralization and censorship resistance.

Concerns are also emerging within the industry. Mert Mumtaz, founder of Helius, said, “Centrally issued stablecoins are not truly users’ assets and can be frozen at any time.”

Some also warn that regulated stablecoins could lead to a privately issued form of central bank digital currency (CBDC).