Circle Freezes $12.6 Million in Confidential USDC, Exposing Surveillance Risks
Circle blacklisted Zamas confidential USDC contract on Ethereum on May 30. The blacklist freezes roughly $12.6 million held in a cUSDC token contract. The freeze prevents holders of confidential USDC (cUSDC) from redeeming the tokens for standard USDC. The action raises fresh questions about issuer control over privacy-focused Decentralized Finance (DeFi) protocols. Circle Blacklist Halts cUSDC Redemptions Circle, the issuer of USDC, maintains a built-in blacklist on the USDC smart contract. Authorized Circle accounts add addresses, and blacklisted addresses cannot send or receive the stablecoin. The frozen contract is an ERC-1967 proxy that holds USDC on behalf of cUSDC token holders. Zamas privacy protocol uses fully homomorphic encryption (FHE) to conceal balances and transfer amounts on public chains. Circle blacklisted the Zama (privacy protocol) Confidential USDC (cUSDC) contract on Ethereum. Source: USDTBanList Circle has not publicly explained the decision. Past freezes have followed sanctions orders, court directives, or suspected illicit activity. The company blacklisted Tornado Cash-linked USDC in 2022 after the U.S. Treasury sanctioned the mixer. ZachXBT Links Freeze to Overnight Finance On-chain investigator ZachXBT traced the underlying funds to a wallet, which deposited 12.4 million USDC into Zama on May 11. The wallet appears to belong to Overnight Finance. Overnight Finance recently held a Snapshot governance vote to distribute