Stablecoin war erupts as Circle fails to freeze hacked Drift funds: What’s going on?

Solana’s stablecoin usage across its DeFi ecosystem could be gearing up for a structural change as Tether openly challenges Circle’s USDC dominance. 

The catalyst? Circle’s inaction in freezing the $285 million in stolen funds from the Solana-based Drift decentralized protocol. 

While most of the funds, $232 million, were in USDC, Circle failed to freeze the funds, sparking backlash. 

Now, Drift’s $150 million recovery plan is mostly backed by Tether. Additionally, the protocol will ditch USDC for USDT. 

Interestingly, Solana’s leadership is backing the move. Lily Liu, president of Solana Foundation, hailed USDT as the “original and most liquid stablecoin.” 

She added that the broader shift was ‘just getting started.’ This implied the chain’s leadership supported USDT over USDC for security and liquidity reasons. For supporters, Tether would be swift to freeze assets in the event of a hack in the Solana ecosystem. 

Circle hit with lawsuit over Drift hack

Beyond being a PR nightmare, Circle’s inaction on the Drift breach is now facing a class action lawsuit. According to the filing by law firm Gibb Mura, Circle’s inaction enabled North Korean threat actors to steal $230 million from Drift investors. 

Notably, Circle’s CEO Jeremy Allaire defended the firm’s inaction, stating they only freeze funds with a court order. However, Bloomberg analyst James Seyffart slammed the argument as ‘weak.’  

Either you’re a decentralized protocol and literally do not have the power to freeze, or you’re not and you should be freezing hacked funds. This middle ground hand wavy ‘only with a court order’ stuff is weak.

Will USDT dominate the Solana stablecoin supply?

Collectively, Tether’s charm offensive and Circle’s woes could offer USDT renewed momentum to regain Solana’s stablecoin dominance. Especially if other Solana DeFi platforms also replace USDC with USDT. 

For perspective, the FUD that Tether is an unaudited and unregulated stablecoin issuer partly contributed to USDC’s growth. Since 2022, this has allowed USDC to dominate Solana’s stablecoin supply, hitting a record market share of 80% in early 2025. 

But there has been an ongoing shift.

As of writing, USDC dominance was about 55%, down from the 80% peak. Over the same period, USDT dominance rose from 16% to 21%. Now, Tether is getting ready for an audit as it eyes its U.S. market debut. 

If the recent events trigger a structural shift, then USDT market share in Solana could accelerate even further. 

Final Summary

• Solana leaders supported Drift’s ditching USDC for USDT as part of its $150 million recovery plan backed by Tether.
• Amid Circle woes, USDT’s dominance in Solana stablecoin could accelerate from the current 31% market share.