Thieves took about $6.3 billion from Binance on October 29, and within hours Circle had frozen more than $800 million of USDC and Tether more than $1.5 billion of USDT, CNBC reported. By November 2 Circle had raised its count to more than $1.1 billion, a spokesperson told CNBC, and Tether put its own at more than 1.567 billion USDT, about $2.7 billion between the two issuers. Each stablecoin freeze began as an issuer’s own decision, taken before any court had ruled. The GENIUS Act regime that starts on January 18 sets rules for freezes that a court or federal agency orders, and none for the urgent kind that saved Binance’s balance sheet.
Stablecoin freeze powers moved faster than the law
Tether says it froze its share within 30 minutes of the attack. Binance put the coins frozen on-chain across all assets at about $3 billion and pledged to cover all customer losses, starting with its SAFU emergency fund. The FBI named North Korea’s TraderTraitor group on October 31 in an FBI alert that urges exchanges, DeFi services and analytics firms to block transactions with the hundreds of addresses it lists. That alert came two days after the freezes, and it asks firms to act and orders nothing.
A freeze stops the coins moving and returns nothing. The USDT and USDC stay in the attacker’s addresses until the issuer burns them and reissues the value, which law enforcement typically sets in motion with a court order or seizure warrant, Ari Redbord of TRM Labs told CNBC. Chainalysis said returns can take months or years. Binance had covered about 95% of the impacted amount by November 1, PYMNTS reported, so it carries the cost of that wait.
What the GENIUS Act requires
Section 4(a)(6)(B) of the GENIUS Act allows a permitted issuer to issue only if it “has the technological capability to comply, and will comply, with the terms of any lawful order”. Section 2(16) defines a lawful order as a final and valid order from a court or an authorized federal agency that names the coins or accounts “with reasonable particularity” and is open to review or appeal. Section 4(a)(5) adds a Bank Secrecy Act duty to keep “technical capabilities, policies, and procedures to block, freeze, and reject” transactions that break federal or state law. Sections 3 and 8 apply the lawful-order test to foreign issuers such as Tether whose coins trade in the US, one of the questions four regulators are now answering for foreign coins.
FinCEN’s proposed rule on that duty, still not final, says an issuer must hold the capability but “would not be required to block, freeze, or reject a transaction when it is under no legal obligation to take action”. A freeze on an exchange’s report, hours before a judge sees the case, sits outside the lawful-order section and outside the proposed rule. The Act makes the capability compulsory and leaves its voluntary use to each issuer.
Two issuers, two policies
Circle writes its limits down. Its access denial policy says it will block addresses to comply with orders from US or French authorities, and “may” block them on “certain urgent law enforcement requests pending a valid court order” or to protect its network. It reverses a block only on formal confirmation from an authority or court, or when a security incident has passed. Circle says it froze “in coordination with law enforcement”, according to a November 5 statement, but has not said whether a court order came first. Tether has named no request at all. Tether’s terms of service let it freeze tokens wherever it “determines it is prudent to do so”, and its release counts more than 7 billion USDT frozen to date.
Those texts decide who carries the risk. A lawful order under the Act must be open to review or appeal, while a voluntary freeze comes with whatever review the issuer’s own policy offers. A slow freeze leaves the victim with the loss, and a wrong one leaves an innocent holder waiting on the issuer. The OCC’s final GENIUS rule left anti-money laundering standards to Treasury, so the procedure examiners will test is still being written.
Bottom line
The Binance freezes were the fastest recovery tool in crypto, and they rested on issuer discretion the GENIUS Act does not define. Before January 18, each US issuer needs written criteria for urgent requests, response times and reversals, because the statute only covers the orders that arrive later. The same test binds issuers on the state charter route, since Section 4 applies to every permitted issuer. More stablecoin coverage sits on the GL Insight hub.
Watch for:
- The final FinCEN and OFAC rule on blocking and freezing
- Court orders to release or reissue the frozen USDC and USDT
- Changes to Circle’s access denial policy or Tether’s terms
