On October 29, 2026, the crypto world witnessed a dramatic demonstration of stablecoin issuers' power when over $2.3 billion in stablecoins was frozen within hours of a security incident. Tether locked $1.567 billion in USDT, while Circle froze more than $800 million in USDC. These actions were not emergency measures but the execution of powers outlined in each issuer's published terms.
The authority to freeze funds stems from the legal frameworks established by Tether and Circle. Tether's Terms of Service allow the company to freeze tokens in its 'sole discretion' without requiring a court order. Circle's USDC Terms grant similar authority, permitting the company to block addresses and freeze assets if it determines the activity is associated with illegal acts or terms violations.
The mechanics of freezing differ between the two issuers. Tether's USDT operates as a contract on networks like Ethereum and TRON, with a blacklist function that can be called only by Tether's owner multisig. Circle's USDC, however, relies on its terms to block 'certain USDC addresses' and freeze associated USDC in its sole discretion. Despite these differences, the result is the same: frozen balances remain visible on the blockchain but are rendered inert.
The incident highlights a tension between the stated postures of the two issuers. Tether has supported over 2,300 cases globally and frozen over $4.4 billion in assets, including a coordinated effort with OFAC and US law enforcement in April 2026 to freeze more than $344 million in USDT. Circle, on the other hand, has historically emphasized a more cautious approach, with CEO Jeremy Allaire stating in April 2026 that Circle does not freeze USDC without a formal legal basis. Yet, in this instance, both issuers moved within hours, suggesting that the practical response may converge regardless of the issuer's stated preference for court-ordered processes.