Tether and Circle clash over frozen stablecoin funds—who protects users more?
Stablecoin issuers Tether and Circle have taken different approaches to freezing user funds over the past two years. Between 2023 and 2025, Tether blocked around $3.3 billion in USDT, while Circle froze roughly $109 million in USDC. The disparity has sparked debate about how these companies handle lost or stolen assets.
Questions have arisen over whether issuers should unfreeze trapped tokens after verifying identities and confirming errors. Users now face uncertainty about recovering funds sent to incorrect or unsupported addresses. Tether has ramped up its freezing activity in recent months. In a single 30-day period, it blocked $514 million across 370 addresses, bringing its 2025 blacklist total to $1.26 billion. The company has occasionally used a freeze, burn, and reissue model, allowing it to return funds in select cases. However, this process remains at Tether’s discretion, often limited to contracts that prevent withdrawals.
Circle, by contrast, has acted more cautiously. Its freezes typically follow court orders or regulatory demands. The company’s terms explicitly state that USDC transactions are irreversible and non-refundable once completed. Despite this, Circle reserves the right to block addresses linked to illegal activity or violations of its policies. Critics, including analyst ZachXBT, have accused Circle of inaction, particularly after it failed to freeze stolen USDC during the Drift Protocol exploit.
Users have reported losing access to USDC after sending it to unsupported addresses or contracts. Circle warns that such transfers may result in permanent loss and that it accepts no liability. Unlike Tether, it does not offer a formal recovery process for mistaken transactions. The differing policies of Tether and Circle leave users with varying levels of protection. Tether’s approach allows for some fund recovery, though decisions remain at its sole discretion. Circle’s stricter stance means fewer freezes but also fewer options for those who lose assets. As stablecoin use grows, the handling of frozen or lost funds will likely face further scrutiny.
