Circle misses Drift freeze; Solana shifts USDC to USDT as Tether backs plan
A “stablecoin war” is emerging on Solana after Circle allegedly failed to freeze $285M stolen from the Drift DeFi protocol. Most of the stolen funds—$232M—were in USDC, but Circle did not act, triggering pushback.
Drift’s $150M recovery plan is now reportedly backed mainly by Tether. In response, the protocol plans to drop USDC and move to USDT. Solana Foundation President Lily Liu publicly praised USDT as the “original and most liquid stablecoin,” implying the chain’s leadership supports USDT for security and liquidity reasons.
Circle’s inaction is also escalating legally. A class action lawsuit filed by Gibb Mura alleges Circle’s failure to freeze enabled North Korean threat actors to steal about $230M from Drift investors. Circle CEO Jeremy Allaire said the firm only freezes assets with a court order, a position criticized by Bloomberg analyst James Seyffart.
Market context: USDC dominance on Solana has fallen sharply from ~80% (early 2025) to ~55%, while USDT rose from 16% to ~21%. The article also notes Tether is preparing an audit ahead of a planned U.S. market debut.
If more Solana DeFi apps follow Drift in replacing USDC with USDT, USDT’s share could accelerate further and reshape stablecoin liquidity on the chain.
Bullish
This news is broadly bullish for USDT on Solana because it signals a potential shift in stablecoin rails: Drift’s plan to replace USDC with USDT, plus public endorsement from Solana leadership (via Lily Liu), can accelerate migration of liquidity and trading pairs.
In the short term, the headline risk around USDC (freeze capability and legal scrutiny) can drive traders and protocols to reduce USDC exposure, improving USDT demand and strengthening USDT liquidity/price stability on SOL-based venues. Historically, similar “issuer-action vs. inaction” controversies have led to short-term preference rotations toward the stablecoin perceived as more operationally responsive during incidents.
In the long term, if more Solana DeFi protocols follow Drift’s approach, USDT could gain structural dominance on the chain—especially as Circle faces reputational and legal overhang, while Tether prepares an audit and positions itself as faster to freeze. The key risk is that any regulatory/audit timeline issues or further legal outcomes could also create volatility; however, the article’s core direction—USDT replacing USDC—leans supportive for USDT flows and market stability on Solana.