Circle froze approximately $12.6 million (roughly equivalent in ₮) worth of USDC, funds that have an on-chain link to the privacy protocol Zama. According to on-chain analyst ZachXBT’s public record from May 30, this freeze is likely related to an ongoing civil lawsuit that is unrelated to the Zama protocol itself — meaning the trigger was a judicial process, not Circle determining the protocol itself was problematic. Once frozen, the USDC balance in the relevant addresses cannot be transferred out until Circle lifts the blacklist flag.
Editorial Take: How Close Is This News to USDT Card Users?
Let’s start with the conclusion: what got frozen this time was USDC, not USDT. But what really matters to U-card users isn’t “which coin got frozen” — it’s the structural fact that centralized stablecoin issuers hold unilateral on-chain freezing power. Tether, the issuer of USDT, also has an addBlacklist function and has executed freezes multiple times in the past.
Who is directly affected? Anyone using USDC as a top-up channel for a virtual card. For example, some users are accustomed to funding cards like Crypto.com Visa or Wirex — which support multi-currency top-ups — using USDC. If your funds sit at an intermediary address flagged by a judicial order before arriving at their destination, there is theoretically a tail risk of being frozen. By comparison, the MPCard Asia Elite variant relies primarily on single-currency USDT top-ups, with a shorter chain and fewer intermediary hops — but this doesn’t mean USDT lacks the same freezing mechanism; it simply wasn’t the subject of this particular event.
Timeline expectations:
- Within 7 days: Unless your address happens to be transactionally linked to the address cluster in this case, you won’t notice anything. This is a targeted freeze, not a mass action.
- Within 30 days: USDC will not depeg because of this; reserves are unaffected, and normal top-ups, spending, and withdrawals continue as usual.
- Within 90 days: Worth watching whether Circle adjusts the disclosure cadence of its freezing policy as a result.
Historical Comparison: How Is This Different from the 2023 Incident?
Placing this alongside past “issuer action” events makes the boundaries clearer:
- Circle’s freeze after the 2022 Tornado Cash sanctions: Triggered by OFAC sanctions, this was a compliance obligation with almost no discretion for Circle.
- USDC’s brief depeg in March 2023: Caused by the collapse of a reserve bank (SVB) — a reserve-side risk unrelated to freezing. USDC briefly dropped to 0.88 before recovering.
- This time: The trigger is a civil lawsuit’s judicial process — neither an OFAC sanction nor a reserve issue. This means the scope of freezing is expanding from “national-level sanctions” to “ordinary civil disputes” — the threshold is lowering.
The common thread: all three cases confirm the same thing — a centralized stablecoin’s “face value” is backed by the issuer, and its “usability” is also controlled by the issuer. The difference: this freeze’s legal basis is more mundane, bringing it closer to ordinary users than a sanctions list would be.
Compliance Boundary: Current Status
To be clear: holding and using USDC / USDT to fund virtual cards is legal in the vast majority of jurisdictions — this freeze targeted specific addresses, not the currency or card product itself. This falls under the status of “clearly permitted, but the issuer retains unilateral freezing power.”
Readers sensitive to regional differences can refer to our EU compliance guide — under the MiCAR framework, stablecoin issuers have clear obligations regarding reserves and redemption, but this does not prohibit issuers from executing judicial freezes. Singapore users can refer to the Singapore compliance guide. Worth noting: compliance does not mean funds can’t be frozen — these are two independent dimensions.
Milestones Worth Watching Next
- Whether Circle issues an official statement: As of publication, the freeze was discovered on-chain before any official announcement. Watch the Circle Transparency page for further disclosure.
- ZachXBT’s follow-up tracking: He typically updates the fund flows and case linkage of frozen addresses, an early signal of whether this will expand.
- Whether Tether follows with similar action: USDT holders should pay closer attention to any new blacklisted addresses from Tether during the same period.
- Total number of frozen USDC on-chain addresses over the next 30 days: A notable increase would indicate the “normalization of judicial freezes” trend has taken hold.
Editorial Recommendations
- Users holding MPCard and funding with single-currency USDT: No action needed. This event does not involve your fund path.
- Users funding cards like Crypto.com Visa or Wirex with USDC: Continue your existing habits, but avoid using intermediary addresses of unknown origin, or mixer / privacy-protocol addresses, as funding stepping stones — that’s the real risk in this freeze, not USDC itself.
- Users shopping for a new card: Factor in whether the funding path passes through third-party intermediaries. The shorter the chain and the fewer the intermediary hops, the lower the tail risk of being caught up in a judicial flag. See our 2026 Top 5 U-Card Roundup for a side-by-side comparison.
- What not to do: Don’t panic-convert all your USDC into USDT because of this news — both issuers hold the same freeze switch, and switching coins doesn’t eliminate this structural risk, it just swaps one issuer for another.
Bottom line: this isn’t a credit event for USDC — it’s another reminder that a centralized stablecoin’s “usability” always rests in the issuer’s hands. Diversifying funding channels and shortening the fund path matters more than fixating on “which coin to hold.”