Circle Freezes $12.6M in Stablecoins Linked to Zama Without Prior Notice: ZachXBT
Circle froze $12.6 million in USDC tied to Zama's confidential smart contract, with ZachXBT saying the reason is unclear and notice may not have been given.
Intelligence analysis by GPT-5.4 Mini
Circle's freeze of $12.6 million in USDC linked to Zama has drawn criticism because ZachXBT says the funds may have been caught up in unrelated legal issues and the Zama team was not warned first. The incident adds to a broader dispute over when stablecoin issuers should freeze funds.
A company that makes a digital dollar locked up $12.6 million of it. A tracker of crypto movements said the money was tied to a privacy project called Zama, but the reason for the lock was not clear.
It is a bit like a bank freezing a pile of cash sitting in a shared safe. If the bank locks it without warning, the people using the safe may suddenly lose access even if they did nothing wrong.
The article says this is important because it shows one company can still control some money on a blockchain. That makes people argue about who should be able to stop funds and when.
Analysis
What happened
Circle froze $12.6 million in USDC connected to Zama's confidential USDC smart contract, according to onchain sleuth ZachXBT. He said the contract is publicly labeled on block explorers and in Zama's technical documentation, but the exact reason for the freeze is still unclear.
Why the freeze is disputed
ZachXBT said wallets linked to Overnight Finance deposited $12.4 million into the Zama protocol on May 11, 2026. He suggested the freeze may be tied to an ongoing but unrelated civil court case. In his view, the important point is that Circle allegedly acted without notifying the Zama team first, which he called precedent-setting because funds had already been commingled with Zama users.
Wider context
The article places this move inside a larger controversy over Circle's freeze policy. In March, ZachXBT accused Circle of "wrongfully" freezing 16 stablecoin wallets tied to online casinos and legitimate crypto exchanges, saying those wallets were not clearly related. He later claimed Circle failed to freeze about $420 million across 15 separate cases involving fraud or stolen funds since 2022, including $232 million from the April 2026 Drift Protocol hack.
The story also notes that users later filed a class action against Circle over the Drift case, arguing that funds moved through Circle's Cross-Chain Transfer Protocol. Circle did not respond to Cointelegraph by publication time, so the article leaves the motive for this freeze unresolved.
Key points
- Circle froze $12.6 million in USDC linked to Zama's confidential USDC smart contract, according to ZachXBT.
- ZachXBT said the reason for the freeze is unclear and the Zama team does not appear to have been notified first.
- He said wallets linked to Overnight Finance deposited $12.4 million into Zama on May 11, 2026.
- The article says the move adds to criticism of Circle for both freezing legitimate funds and missing some stolen funds.
- Circle did not respond to Cointelegraph before publication.
