Centre Consortium, the issuer of the USD Coin (USDC), has confirmed that an Ethereum address holding $100,000 worth of USDC has been frozen in response to a law enforcement request, The Block reported on Wednesday.
According to the publication, a Circle spokesperson confirmed that an address was blacklisted, and the funds inside frozen, at the request of a law enforcement agency. Although no specifics were given about the blacklisting, which occurred in mid-June, this is the first time that the consortium has ever called a “blacklist” smart contract function on an address.
The Circle spokesperson said:
“Centre can confirm it blacklisted an address in response to a request from law enforcement. While we cannot comment on the specifics of law enforcement requests, Centre complies with binding court orders that have appropriate jurisdiction over the organization.”
In normal circumstances funds held on the Ethereum blockchain are under the control of the address owner, but in order to remain compliant, Centre has the power to blacklist an address, which makes it unable to execute transactions.
The consortium’s Blacklisting Policy document reads:
“When an address is blacklisted, it can no longer receive USDC and all of the USDC controlled by that address is blocked and cannot be transferred on-chain.”
According to the document, only the consortium itself has the power to blacklist addresses, and not individual USDC issuers. The policy further pointed out that Centre has retained the power to blacklist addresses under two circumstances, the first being if there is a potential security breach or threat to the network.
The second reason to consider a blacklist is:
“To comply with a law, regulation or legal order from a duly recognized U.S. authorized authority, U.S. court of competent jurisdiction or other governmental authority with jurisdiction over Centre.”
Either way, in order to blacklist an address, the majority of the firm’s Board of Managers needs to vote on whether to approve or object to such a request. While the firm has the power to reverse a blacklist, it has warned on its website that blacklisted addresses may be “wholly and permanently unrecoverable”.