Circle Explains USDC Freeze Limits After Drift Protocol Hack

Highlights:

• Circle has explained why it failed to freeze stolen USD during the Drift Protocol exploit.
• The stablecoin issuer argued that freezing assets without legal backing could encourage politically motivated interference.
• Circle is also pushing for the advancement of the CLARITY and GENIUS Acts in Congress as soon as possible. 

Stablecoin issuer Circle has finally responded to critics, blaming it for enabling the exploit on Decentralised Exchange (DEX), Drift Protocol. In its defence, Circle argued that as a regulated entity, it is obliged to freeze assets only when compelled by law enforcement agencies and other higher authorities to take such actions. With this, the stablecoin issuer aims to protect users from arbitrary or politically motivated interferences, while also keeping their assets safe. 

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NEW: CIRCLE RESPONDS TO DRIFT EXPLOIT, SAYS IT FREEZES USDC ONLY UNDER LEGAL COMPULSION. URGES PASSAGE OF GENIUS AND CLARITY ACTS TO DEFINE CRYPTO LEGAL FRAMEWORK.#USDC #CryptoNews #DeFi #Blockchain pic.twitter.com/VLr7sQSUIZ

— Crypto News Hunters 🎯 (@CryptoNewsHntrs) April 10, 2026

The Drift Protocol Hack Incident

On April 1, Crypto2Community reported that Drift Protocol was the target of a coordinated exploit that resulted in losses worth roughly $285 million. PeckShieldAlert’s report disclosed that the hack affected over 50% of the DEX platform’s Total Value Locked (TVL) assets. The exchange’s dedicated token, DRIFT, also suffered significant declines.

The stolen assets were bridged from Solana (SOL) to Ethereum (ETH) via the Cross-Chain Transfer Protocol (CCTP) TokenMessengerMinterV2. Drift Protocol confirmed the exploit, noting that it was not because of a code vulnerability. Instead, the hackers gained unauthorized access to key approvals inside Drift’s Security Council and made key changes that enabled them to move funds away from the DEX platform.

Drift Protocol reported: 

“This was a sophisticated operation that appears to have involved multi-week preparation and execution, including the use of durable nonce accounts to pre-sign transactions that delayed execution.”

ZachBXT Explains How Circle Enabled the Drift Protocol Exploit

A few days after the hack Incident, renowned on-chain investigator ZachXBT tweeted that Circle has been enabling crypto hacks. According to the on-chain investigator, Circle failed to freeze over $420 million in stolen USDC across 15 cases that happened between 2022 and 2026. Explaining further, ZachXBT stated that Circle can freeze USDC at the smart contract level once it suspects a hack. However, the stablecoin issuer fails to act appropriately when funds are still in USDC form. 

ZachXBT argued that the delay in freezing the stolen assets always enabled the attackers to move USDC Cross-Chain and convert them into other assets within hours. The on-chain investigator cited the Drift Protocol exploit on Solana as a clear example of another delayed response from Circle. ZachBXT argued that Circle had enough time to take appropriate actions to stop the attacker from moving the asset. 

For context, after the exploit, the hacker converted the stolen assets into USDC on Solana before moving them across chains. The attacker also used Circle’s Cross-Chain Transfer Protocol to move roughly $232 million from Solana to Ethereum. Finally, the scammer moved the assets across more than 100 transactions, lasting over six hours during the US business hours.

ZachXBT added that Circle received alerts about the incident within the hours when the stolen assets were still in USDC. However, no action was taken to halt the transfers. It is worth noting that a few days before the Drift Protocol exploit, Circle acted very swiftly in freezing 16 business hot wallets associated with a civil lawsuit in the US, corroborating ZachBXT’s inconsistent enforcement claims. 

Circle Pushes for the Passage of the CLARITY and GENIUS Acts

Beyond reacting to the accusations, Circle emphasized the need to pass the GENIUS and CLARITY Acts. The stablecoin issuer believes that passing these regulations into law affords companies like Circle the legal backing to take appropriate action when similar incidents occur in the future. Earlier today, Crypto2Community reported that Coinbase Chief Executive Officer (CEO) Brian Armstrong joined the United States Treasury Secretary Scott Bessent in pushing for the advancement of the CLARITY Act in Congress.

We agree. Thank you @SecScottBessent for saying it. It's time to pass the Clarity Act.

Grateful for all the bipartisan work among Senators and staff over the past several months to make this a strong bill. https://t.co/jHoZ1bfLVZ pic.twitter.com/YBKebDkq8B

— Brian Armstrong (@brian_armstrong) April 10, 2026

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