A stablecoin can live on a public blockchain without giving its holder absolute control. A U.S. forfeiture case involving Tether and Circle shows how issuer powers can determine what happens to funds under legal orders.
The USDT vs. USDC debate does not have a clear winner, but users should carefully examine who has control over the money in their crypto wallet.
On March 27, 2025, a forfeiture complaint filed by the U.S. Department of Justice included an interesting example of how Tether and Circle would proceed in the case of Gotbit.
Prosecutors stated that in the event of a seizure, Tether would burn the appropriate amount of USDT and transfer an equivalent amount to a government-controlled wallet.
On the other hand, Circle would block the USDC and transfer the dollar value to a government-controlled bank account.
In the Justice Department complaint, prosecutors referred to approximately $23 million in cryptocurrency associated with Gotbit Consulting. The assets included about $18.72 million in USDT and some $4.18 million in USDC that Gotbit agreed to forfeit as part of a guilty plea in connection with market rigging and wire fraud.
According to the complaint, Tether would transfer approximately 18.72 million in USDT to a government-controlled cryptocurrency wallet by burning the amounts in three wallets and issuing an equivalent amount to the government.
At the same time, the complainants stated that in the case of USDC, Circle would permanently blocklist or freeze the amount and send the equivalent in dollars to the government’s crypto wallet. In both cases, the procedure would not require changes to the blockchain itself but would use the issuer’s tools to remove the money from circulation.
Perhaps this difference deserves more attention in the USDT vs. USDC debate than it receives at this time. Both stablecoins are supposedly fully backed on a dollar-for-dollar basis and generally trade at or near $1. However, the issuers always reserve the right to freeze or seize the funds in a user’s account.
Tether’s code reveals why the company would take such steps in case of Gotbit. In the Ethereum token contract code, one can find a function called `destroyBlackFunds`.
This function is used to destroy tokens at a specific address, which effectively removes them from circulation. The code specifies that this function can only be called by the contract owner and that the address to which the tokens belong must be on a blacklist.
This is an example of how the Tether team could seize the USDT funds in Gotbit’s wallet. The ability to do so is built into the code itself, and the only reason it was not used before is probably that there was no reason for it.
Meanwhile, in the case of USDC, the situation is similar but slightly different. Circle highlights the ability to blocklist addresses and freeze funds in its USDC terms. Specifically, the company reserves the right to block payments in the case of a court order or other conditions specified in the terms.
In particular, users should pay attention to section 9.7. It specifies that Circle can freeze the USDC or transfer the dollar value to a government-controlled account at the company’s request. The ability to block payments and transfer funds to a government account is also available to Tether.
In any case, the USDT vs. USDC comparison should consider the fact that both issuers can seize funds in the case of a government request.
However, the ability to block addresses is not the only factor influencing the choice between USDC and USDT. Users should also be aware of other risks, including those related to reserves, redemptions, and market risks.
From the perspective of the width of the peg, S&P Global Ratings gave USDT a rating of 5, or weak, compared to 2, or strong, for USDC. This information may not be entirely accurate since the ratings apply to the probability of a stablecoin performing as intended, not all the risks.
Furthermore, in the case of USDC, there is little room for error. At the end of 2022, during the collapse of Silicon Valley Bank, which had $3.3 billion of USDC reserves, the stablecoin's daily closing price fell to about $0.96 in deposits. Many companies faced the threat of losing their money.
As can be seen, the USDT vs. USDC comparison involves more than just the ability to block addresses. Either of the stablecoins could be subject to sudden depreciation due to problems with the reserves or the inability to redeem them for cash.
Users should consider stablecoins as an additional tool for buying and selling goods or making payments. Their attractiveness and safety are dictated by the balance of the dollar value of the reserves against the token and the issuer’s ability to redeem them.
However, the example of the Gotbit case clearly shows that the parties can take control of the money in an unexpected way.
No comments yet
