Recent allegations against Circle by well-known on-chain investigator ZachXBT raise questions about oversight mechanisms surrounding stablecoins and their use in illicit financial flows.
Allegations Against Circle
ZachXBT has accused Circle of facilitating illicit transactions associated with North Korean IT operatives. He claims that the company ignores monitoring or freezing such activities despite its claims of regulatory compliance.
Regulatory Scrutiny and FATF's Warning
Circle and its executives have yet to publicly address these accusations, adding tension to the situation. The FATF warns that stablecoins like USDC play a significant role in global financial crimes, including those involving state actors. ZachXBT stated: "Circle’s USDC is primary infrastructure for North Korean IT worker funds. Despite their compliance marketing, they do nothing to freeze funds. I traced high eight figures in recent months. It’s a crime supercycle and no one cares."
Illicit Use of USDC and Compliance Challenges
According to ZachXBT, North Korean operatives utilized tens of millions of dollars in USDC for illicit cross-border payments. This scenario raises compliance challenges for Circle and its related exchanges, increasing regulatory scrutiny.
The reported use of USDC in illicit transactions raises questions about Circle's and other financial institutions' ability to effectively comply with regulatory requirements. This may lead to stricter norms and obligations for companies involved with stablecoins.
