More than $12.6 million worth of USDC has been frozen after Circle blacklisted the smart contract behind Zama’s confidential USDC (cUSDC) on Ethereum. The move came after a wallet linked to Overnight Finance reportedly deposited millions into the protocol.
Community members are questioning why Circle froze the entire cUSDC contract rather than targeting only the wallet allegedly connected to the ongoing dispute.
The issue first came to light after blockchain investigator ZachXBT flagged the blacklist action on Saturday.
According to his findings, Circle froze Zama’s cUSDC contract, effectively locking approximately $12.6 million in USDC. The freeze may be connected to a wallet that deposited around $12.4 million USDC into the protocol on May 11.
The wallet is reportedly linked to Overnight Finance, a project that has recently faced accusations from some holders who claim they were affected by a rug pull. However, no official confirmation has been provided linking the frozen funds directly to any wrongdoing.
Further blockchain analysis showed the address had participated in an Overnight Finance governance vote before the freeze occurred.
Zama co-founder Rand Hindi said the team believes its protocol may have been caught in the middle of a separate legal dispute.
“It seems our confidential USDC contract was caught in the crossfire of another case,” adding that the team is actively investigating the situation.
As of now, the frozen contract still holds roughly $12.6 million in USDC, with no funds leaving the address since the blacklist was applied.
Perhaps more concerning for users is that Zama reportedly received no advance notice before the freeze was executed.
The incident shows a growing concern surrounding centralized stablecoins. While USDC operates on public blockchains, Circle retains the ability to freeze assets and blacklist addresses when required by legal, regulatory, or compliance actions.
Critics argue that the latest case indicates how those powers can sometimes affect users who are not directly involved in a dispute.
Defi researcher Zun questioned why Circle froze the entire cUSDC contract instead of targeting only the wallet allegedly linked to Overnight Finance.
The controversy also revives concerns raised earlier this year when Circle froze 16 wallet addresses and later reversed the action following community backlash.
At the moment, holders of cUSDC have no clear timeline for when the frozen funds could be released.
The outcome will likely depend on the ongoing investigation and whether the blacklist was applied because of legal action tied to Overnight Finance or another unrelated dispute.
Meanwhile, Zama co-founder Rand said that they will update with more info asap.
CoinPedia has been delivering accurate and timely cryptocurrency and blockchain updates since 2017. All content is created by our expert panel of analysts and journalists, following strict Editorial Guidelines based on E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness). Every article is fact-checked against reputable sources to ensure accuracy, transparency, and reliability. Our review policy guarantees unbiased evaluations when recommending exchanges, platforms, or tools. We strive to provide timely updates about everything crypto & blockchain, right from startups to industry majors.
All opinions and insights shared represent the author's own views on current market conditions. Please do your own research before making investment decisions. Neither the writer nor the publication assumes responsibility for your financial choices.
Sponsored content and affiliate links may appear on our site. Advertisements are marked clearly, and our editorial content remains entirely independent from our ad partners.
BNB price surged more than 5% on Friday after VanEck launched the first Binance Coin-linked…
Zcash fell 5% over the past 24 hours and 16% during the week, trading near…
The Bitcoin treasury trend exploded over the past year, but not everyone is convinced that…
Blockchain investigator ZachXBT reported that Circle may have blacklisted the Ethereum contract address associated with…
Crypto was once seen as a way to move money quietly across borders. But now…
Hyperliquid’s native token, HYPE, has surged to a fresh all-time high above $67, pushing its…
