Circle Faces Scrutiny Over USDC Use by North Korean IT Workers

Circle, the issuer of the USDC stablecoin, has come under scrutiny from on-chain investigator ZachXBT for its compliance standards and the growing use of USDC by malicious actors, particularly North Korean IT workers. ZachXBT highlighted that these workers have been utilizing USDC to transfer millions in illicit payments, a practice that has been widely flagged by security experts as a method for stealing funds and information.

ZachXBT's comments were prompted by Circle's recent filing for a national trust bank charter, which would authorize the firm to manage the reserves backing USD Coin. The on-chain analyst criticized Circle for not taking any steps to detect or freeze the activity, despite the scale and visibility of the fund flows. ZachXBT claimed to have identified high eight-figure volumes flowing through these wallets recently, most of it in USDC.

This situation contrasts sharply with Circle's public image as the industry's compliance leader, boasting licenses from major regulators and pushing a cleaner image. For years, Circle’s rival Tether’s USDT drew the most criticism for enabling illicit transactions due to its perceived lack of oversight. In contrast, Circle was viewed as the industry’s compliance leader, boasting licenses from major regulators and pushing a cleaner image. Earlier this year, the firm went public under the same compliance narrative and earned praise for setting a positive regulatory precedent within the industry. However, Circle’s reported failure to take action also contrasts sharply with how Tether and other stablecoin issuers have responded in similar cases, freezing wallets and blocking suspicious fund movements.

While the issuer has yet to publicly deny or acknowledge the allegations, the reports of allowing sanctioned actors to operate unchecked deal a major blow to its reputation. The situation raises questions about Circle's compliance standards and its ability to manage the reserves backing USD Coin effectively. The incident also highlights the ongoing challenge of ensuring that stablecoins are not used for illicit activities, despite the efforts of issuers to promote compliance and transparency.