Circle CEO Warns Of ‘Moral Quandary’ In Companies Freezing Crypto Assets – Pushes For ‘Safe Harbor’ In CLARITY Act

• During a press conference in South Korea, Circle CEO Jeremy Allaire said the company can only freeze assets when directed by law enforcement or the courts due to legal obligations.
• According to him, allowing private firms to act independently raises risks and creates a “moral quandary.”
• Allaire stated that the company is working with U.S. lawmakers to include a “safe harbor” provision in the CLARITY Act to allow stablecoin issuers to take action in extreme cases without prior legal orders.

Circle (CRCL) CEO Jeremy Allaire on Monday defended the company’s action to not freeze the $280 million in USDC after the Drift Protocol hack, which occurred earlier this month, and led to criticism against the firm for being lax. 

“Circle has a very, very clear performance obligation under the law," Allaire said during a press conference in South Korea after announcing a memorandum of understanding (MoU) with South Korean cryptocurrency exchange operators Dunamu and Bithumb. "Circle follows the rule of law, and we are able to undertake actions such as freezing a wallet at the direction of law enforcement or the courts."

CRCL’s stock tumbled as much as 1.7% in pre-market trade on Monday amid broader weakness in both the cryptocurrency and equities markets. On Stocktwits, retail sentiment around the USDC (USDC) stablecoin issuer remained in ‘bearish’ territory over the past day. Retail sentiment around USDC remained in the ‘bullish’ zone. 

Why Didn’t Circle Freeze USDC Funds During Drift Exploit?

According to the Circle CEO, the company does not get to decide "what is the right path or not," resulting in a "moral quandary" for a private company if it gets to make such decisions. 

"If there are others that believe that Circle should just step away from what the law says and do its own, make its own decisions, I think it's a very risky proposition," Allaire stated.

His comments come after the Drift Protocol was hacked for $280 million earlier this month. According to on-chain investigator ZachXBT, Circle could have frozen the funds in the time the hacker took to steal $280 million from Drift, moving it from Solana (SOL) to Ethereum (ETH) via the firm’s cross-chain transfer protocol. 

CLARITY Act Could Expand Emergency Powers

While Allaire said the company’s hands were tied when it comes to freezing funds, he also hinted that the current framework could evolve. He stated that the company is currently working with U.S. authorities on the CLARITY Act to provide a specific "safe harbor" for issuers like Circle, allowing them to take preventive actions under certain extreme circumstances.

"That is something that we've been discussing with lawmakers, and we believe would be necessary, but we need that to be in the law, not just what we decide on our own," Allaire said.

Read also: Bitcoin Holds Onto $70,000 After Oil Prices Spike On Trump’s Strait of Hormuz Blockade

For updates and corrections, email newsroom[at]stocktwits[dot]com.