What to know:
- Circle froze roughly $12.6M USDC based on a U.S. court order related to the Zama Contract.
- Ethereum blacklisted contract holding $12.6M causes disruptions in DeFi flows, blocking access to the funds.
- Zama reports hacker deposited 12.5M USDC, over 99% funds, triggering a pause across cUSDC.
Circle has frozen approximately $12.6M USDC following a U.S. federal court order tied to an ongoing legal dispute involving a decentralized finance protocol. The move involves the USDC Contract, where Circle blacklisted a smart contract associated with Zama’s Confidential USDC wrapper on the Ethereum mainnet.
As per Crypto Aman on X, the affected contract holds the funds inside the privacy-focused wrapper, effectively blocking liquidity. Moreover, the blacklisting of the USDC Contract reveals how stablecoin issuers have centralized control over the smart contract system used in decentralized finance.
Also Read | XRP Ledger Set for Major Evolution as Anonix Envisions AI-Powered Web3 Ecosystem
USDC Contract Freeze Disrupts DeFi Liquidity and User Access
The USDC Contract blacklist impacts decentralized finance flows due to a lock-up of assets in the protocol’s smart contract system. There has been a claim by Snapshot that the USDC Contract case has unveiled information about claims for almost $15 million being the assets of OVN holders.
ZachXBT noted that Circle was unable to freeze nearly $420 million across 15 different incidents involving fraud and crypto hack-related thefts since 2022.
No rationale for blacklisting the contract by Circle was made public. However, crypto on-chain analysts say the issuance of the blacklist is an enforcement action related to the civil court order. It proves that stablecoin issuers take action based on legal or law enforcement orders affecting decentralized finance protocols running on the Ethereum network.
Zama Protocol Freezes and Compliance Fallout
Zama co-founder Rand Hindi has clarified that the USDC contract blacklist happened after a restraining order on wallets belonging to the Overnight Finance protocol had been issued. He also said that the Zama protocol was not informed in advance about the blacklist issuance by Circle.
The protocol founder emphasized that Zama does not provide any transactional anonymity since its system is not a mixing service. According to the Zama protocol, the funds amounting to over 12.5M have been deposited in the cUSDC by a hacker when there were no sanctions enforced. It constituted 99 percent of all contract funds.
The new blacklisting incident comes amidst continued criticism of Circle’s freeze policy. The controversy started with Circle’s wallet blacklist and delayed response to the exploitation incidents. However, Circle CEO, Jeremy Allaire, assures that these moves happen only upon legal or law enforcement directive, not during attacks or hacks in real time.
Also Read | AAVE Price Prediction: Consolidation Near $82 Sparks Hope for Relief Rally
Be the first to comment