- A U.S. court has lifted a freeze on $12.5 million in USDC held within the privacy protocol Zama‘s smart contract.
- The freeze was related to an unrelated legal dispute and highlighted the risks centralized stablecoins pose to pooled smart contracts.
- Zama will accelerate its compliance measures and still plans to launch its confidential USDC product this month.
Privacy-focused blockchain firm Zama announced on Tuesday that a U.S. court lifted a temporary freeze on approximately $12.5 million in USDC held within its confidential smart contract, according to a post on X by co-founder Rand Hindi. This decision allows the protocol to resume normal operations and proceed with the launch of its private USDC product later in May.
The funds were originally frozen by Circle after it received a court order connected to a dispute involving stakeholders of an unrelated project, Overnight Finance. However, the court later determined the blanket freeze was unwarranted, Hindi wrote. Consequently, the incident underscores a critical tension between privacy-centric blockchain infrastructure and centralized stablecoins whose issuers can freeze assets.
Zama argued the situation “could have happened to any protocol holding freezable assets,” such as decentralized exchanges or lending platforms. Chief Operating Officer Jeremy Bradley explained the court recognized freezing an entire smart contract pool caused disproportionate harm to uninvolved users. The company demonstrated its protocol could isolate a single disputed account due to its transparent address system.
In response, Zama will now accelerate its compliance roadmap, including tools for automatic enforcement of issuer freezes. Bradley stated these measures were always part of the design, making their deployment more urgent. Meanwhile, the firm remains committed to building on USDC and plans to shield $5 million from its own treasury upon launch.
Despite the legal scare, Bradley said institutional interest has been reinforced by the court’s decision. He noted the ruling demonstrated the protocol can operate within existing legal frameworks while preserving user privacy. The broader issue, he concluded, is the lack of tools for executing targeted freezes without impacting entire smart contract pools.
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