Circle froze $USDC in 16 business wallets tied to a sealed U.S. civil case, drawing fire from ZachXBT and reigniting fears over centralized stablecoin censorship and control.

Circle froze the $USDC balances of 16 business hot wallets late Monday, disrupting operations at several exchanges, casinos and forex platforms and raising urgent questions over how centralized stablecoins exercise their power to block funds. According to PANews, affected firms said the freeze stemmed from “a U.S. civil case whose details have not yet been disclosed,” leaving counterparties guessing why they had been targeted and when, if ever, access might be restored.

On-chain investigator ZachXBT, who first amplified the issue in a post on X, asked bluntly: “How come Circle froze the $USDC balance of 16 unrelated hot wallets late yesterday for a civil case? A basic review of onchain activity makes this look incredibly broad.” In follow‑up comments reported by regional media, he noted that the wallets “appear to belong to exchanges, casinos, and forex platforms, with no apparent connection between them,” yet all were blacklisted in a single action that “has already impacted the operations of these businesses.”

Long-running debate over $USDC’s gatekeeping role

The incident lands just weeks after ZachXBT publicly called Circle “a bad actor” in a separate case, accusing the company of moving too slowly to freeze more than $3 million in stolen $USDC tied to SwapNet users. “Why should anyone continue building on $USDC when you never take care of your users as a centralized stablecoin issuer?” he wrote, arguing that Circle’s enforcement has been “slow or inconsistent” compared with rivals such as Tether. Data cited by CryptoNews shows Tether has frozen roughly $1.6 billion in USDT across more than 2,500 addresses, while Circle has frozen about $110 million in $USDC across fewer than 500 addresses.

The power to blacklist and even wipe frozen addresses is explicitly coded into $USDC’s smart contracts, as legal analysts and policy think tanks have repeatedly noted. Those controls are marketed as a safeguard against hacks and sanctions evasion, yet critics warn that opaque freezes based on undisclosed civil actions risk turning a key settlement asset for crypto markets into a politicized gatekeeping tool. As institutional demand for tokenized dollars grows and platforms such as Coinbase expand $USDC’s footprint, the latest freeze underscores the trade‑off builders face when they choose centralized stablecoins over permissionless alternatives.