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Tether launched a stablecoin wallet, Circle (NASDAQ: CRCL) defended its reluctance to freeze stolen USDC, and the U.S. Federal Reserve says stablecoins still aren’t being used the way crypto boosters claim they are.
- Tether wallet launches, world (allegedly) rejoices
- South Korean ‘revenge firms’ offer murder-for-USDT
- Circle defends non-response to freezing pleas, claims hands are tied
- Circle’s ARC network shifting to proof-of-stake
- Visa embracing stablecoin network validator role
- Federal Reserve report finds stablecoin payments under 1% of total use
- IMF offers tips for avoiding stablecoin bank runs
On April 14, Tether announced the debut of tether.wallet, a self-custodial tool aimed at bringing “the widest and most granular money distribution network built by humanity” to end users (ahem). The new wallet “offers the only assets that truly matter for most of the people,” aka Tether’s USDT and USAT dollar-backed stablecoins, the gold-backed XAUT, and BTC (double ahem).
The wallet, built using Tether’s open-source Wallet Development Kit, is designed to “remove the technical complexity that has historically limited broader adoption of digital assets. Users can send funds using a simple, human-readable identifier such as [email protected],” which will hopefully eliminate the kind of fat-fingered mistakes that are common with normal, lengthy wallet addresses.
All tether.wallet transfers are “signed locally on the user’s device before being broadcast to the network.” Transaction fees will be paid with the asset being transferred, eliminating the need for separate network or “gas” tokens.
For the time being, tether.wallet users can transfer USDT on Ethereum, Polygon, Plasma and Arbitrum; USAT on Ethereum; XAUT on Ethereum, Polygon, Plasma and Arbitrum; and BTC onchain and via the Lightning Network, BTC’s unreliable Layer-2 ‘scaling solution’ (and scourge of law enforcement) The list of supporting networks is set to “expand rapidly within next 30 days,” allowing “seamless swaps” and an “insane user experience.” (Triple ahem.)
Tether CEO Paolo Ardoino called the new tool “The People’s Wallet,” which has a vaguely socialist tone for a purely capitalist enterprise, but never mind. Ardoino claimed that “Tether’s technology is used by more than 570 million people globally” and this is growing by “tens of millions of new wallets added per quarter.”
Rape, murder… it’s just a Tether away
Some of these new South Korean wallets are now offering “revenge” services—up to and including murder—in exchange for USDT. Earlier this month, South Korean media reported on a “revenge agency” advertising its services on the Telegram messaging platform, capitalizing on what the report called “individual vengefulness and anonymity technology.”
Police reported that these revenge tactics include smearing human feces on victims’ dwellings, gluing door locks shut, scattering leaflets in victims’ neighborhoods alleging unsavory activities by the victims, etc. The revenge firms then double-dip by extorting the victims with threats of additional retaliation if they don’t pay up.
Police have arrested some alleged participants, including a suspected ringleader. But other groups appear undeterred and continue to promote everything from “debt resolution,” to “school violence resolution,” to “upper or lower body disabilities” to “accidental death.” Prospective clients are asked to make a deposit of 50% of the asking price “in cryptocurrency (Tether/USDT)” and are reassured that “clients cannot be traced thanks to Telegram and cryptocurrency.”
Circle pushes back on freezing criticism
Tether will presumably be asked by South Korean authorities to freeze the contents of USDT wallets linked to these revenge groups. Over the past year or so, Tether has been keen to promote its cooperation with law enforcement, looking to rehabilitate USDT’s reputation as the fuel that drives criminals, terrorists, and sanctions-evaders.
But both Tether and Circle have come under fire for their inconsistent approach to freezing tokens linked to illicit activity. Last week, Circle was publicly called out for failing to act in a timely manner to freeze USDC tokens linked to a $285 million exploit of the Solana-based Drift Protocol by North Korean hackers.
On April 10, Circle’s chief strategy officer Dante Disparte published the company’s response to this criticism, titled “When Open Systems Are Tested: Accountability, Rule of Law, and the Work Ahead.”
The post noted some of the crypto community’s calls for Circle to freeze tokens, as well as others who urged Circle not to intervene and let ‘code is law’ rule the day. Disparte claimed “the tension between [these two positions] is exactly where the most important policy work for crypto and open internet financial systems are playing out.”
Disparte said that when Circle freezes USDC, “it is not because we have decided, unilaterally or arbitrarily, that someone’s assets should be taken from them. It is because the law requires us to act.” Circle’s freezing ability is “a compliance obligation—exercised only when we are legally compelled by an appropriate authority, through lawful process.”
Disparte said Circle “stands ready to support recovery and accountability efforts with ecosystem participants, and with law enforcement, to the fullest extent the law permits.” But “the legal frameworks that would authorize faster, more coordinated action—while meaningfully preserving property rights and privacy protections—do not yet fully exist … This is a policy problem. And policy problems have policy solutions.”
Essentially, Disparte argued that Circle is unable to act until the crypto ecosystem, regulatory bodies and law enforcement agencies all agree on a way forward. “The goal is not a system where private companies unilaterally decide who loses access to their assets. The goal is a system where legally sanctioned, rights-preserving interventions can happen at the speed of the threat.”
Circle CEO Jeremy Allaire echoed this view during a stopover this week in South Korea, where he claimed it was “a very risky proposition” to suggest that Circle “should just step away from what the law says and … make its own decisions.”
Allaire also claimed to be working with U.S. lawmakers on the Senate’s digital asset market structure bill (CLARITY Act) to include a “safe harbor” for stablecoin issuers. This harbor would allow issuers to take preventative actions in certain circumstances while offering legal cover for these actions.
Blockchain sleuth ZachXBT, who led the post-Drift criticism of Circle, responded by calling Allaire’s hedging “a completely made up statement.” ZachXBT noted Circle’s own terms of service, in which Circle reserves the right to ‘block’ or ‘freeze’ certain USDC addresses that it determines “in its sole discretion, may be associated with illegal activity.”
Circle’s Arc to rely on proof-of-stake consensus mechanism
On a more productive note, Circle announced memorandums of understanding (MoU) with two of South Korea’s leading exchanges, Bithumb and Upbit. For the time being, the MoU’s are effectively exploratory, as the country is still wrestling with its long-delayed digital asset legislation, which will (someday) create a regulated stablecoin market in the crypto-savvy nation.
The ongoing uncertainty of South Korea’s legislative plans likely contributed to Allaire declaring that “I don’t believe Circle would issue a Korean won stablecoin.” But Circle “may find ways to partner with Korean won issuers” and support the consortiums of local banks, fintechs, and crypto firms that will take point on won-backed stablecoin initiatives.
Allaire also used his “Circle in Seoul” presentation to confirm Circle’s plan to issue a native token on Arc, the company’s “enterprise-grade, stablecoin-native” Layer-1 “economic operating system.” He didn’t expand much beyond last November’s comments that Circle was “exploring the possibility” of an Arc-native token, but he did say that this token would “help provide mechanisms for governance, incentives [and] economic alignment.”
But bigger news came when Allaire said the plan was to “ultimately move [Arc] into a proof-of-stake system over time.” Allaire said the company hopes to “have more to share about that in the not too distant future.”
A proof-of-stake network relies on a large number of independent “validators” to allocate a specific amount of network tokens to participate in the transaction consensus mechanism, for which they are rewarded with additional tokens. This differs from the more traditional proof-of-work system in which a smaller number of block reward miners compete to validate transactions, ‘find’ network blocks and claim the block rewards.
Arc is still in testnet, but Allaire said the transition to mainnet would happen “soon,” with a beta version expected sometime this year.
Visa keeps making stablecoin moves
Tempo, the stablecoin-focused Layer-1 launched last year by payment processor Stripe, relies on a Simplex consensus protocol that similarly requires validators. On April 14, Visa (NASDAQ: V) announced that it has joined Tempo as an anchor validator to support network transactions, joining Stripe and Zodia Custody by Standard Chartered as Tempo’s first external validators.
Visa’s head of crypto Cuy Sheffield said the move expands the company’s years of developing its blockchain expertise by “running critical blockchain infrastructure ourselves … supporting the development of stablecoin payment systems that meet the high operating standards our clients and partners expect.”
Visa’s node was configured and managed in-house after six months of work with Tempo’s engineering team. Tempo GTM Nischay Upadhyayula hailed Visa’s reputation for “operational rigor,” adding that the credit card giant has been “a design partner since day one, and joining as a validator is a natural extension of that work.”
Tempo’s mainnet went live last month along with its new Machine Payments Protocol (MPP), an open standard that allows agentic AI and services to coordinate payments programmatically. Visa has already extended MPP to support card payments on its network.
Visa has embarked on multiple stablecoin initiatives in recent years, including tie-ups with BVNK, Circle, Rain, Reap, and more. In March, Visa announced it would serve as a “super validator” on the Canton Network, the privacy-focused chain “built for regulated finance” and backed by a consortium that includes Visa, Circle, Goldman Sachs (NASDAQ: GS), BNY Mellon (NASDAQ: DMF), and others.
Visa will serve as one of ~40 Canton super validators, but is the first major global payments firm to join this party. Visa says its presence will help crypto-wary institutions “experiment with and scale stablecoin payments, settlement and treasury use cases without changing how they already manage risk, compliance and operations.”
Canton’s head of network strategy, Eric Saraniecki, said the network “was built to meet the requirements of regulated finance from day one. Visa’s participation as a Super Validator reinforces that this technology has matured beyond experimentation and into production‑ready infrastructure.”
Federal Reserve says nobody’s using stablecoins for payments
There are numerous studies showing that stablecoins’ primary use case is still largely limited to speculative trading pairs, at least in developed markets. Emerging markets are more likely to use stablecoins as a store of value or for cross-border remittances, but overall stablecoin payment volume currently accounts for “roughly 0.02%” of the global total.
This month, the Federal Reserve Bank of Kansas City offered its own conclusions in a research briefing titled “What are Stablecoins used for Today?” While acknowledging that the data is threadbare, lead payments specialist Franklin Noll found that payments (B2B, P2P, etc.) accounted for just 0.7% of all stablecoin use, equal to about $2 billion annually.
Transfers accounted for the largest slice of this stablecoin pie at 29.3%, although Noll cautions that this consists “mainly of high-value movements into and out of DeFi (decentralized finance) protocols and for internal treasury applications.”
Exchange-based activity claimed a 26.4% share, while ‘finance’ (DeFi) added 17.2% and ‘infrastructure’ accounted for 5.1%. Noll defines the latter as “primarily” cross-chain bridges, “indicating that interoperability problems exist.” These three categories collectively account for over half of all stablecoin functionality.
Another 21.2% of stablecoins are deemed to be “idle,” aka stablecoins “sitting in rarely used wallets, forgotten, lost, or held as small savings.” Noll notes that “rarely used stablecoin wallets may also be a sign that the wallet and its contents are being used as a de facto fiat-denominated savings account,” particularly in countries with unstable currencies subject to rapid depreciation.
Noll concludes by remarking that “although stablecoins are widely believed to have the potential to operate independently of crypto finance … the large role played by crypto finance in the stablecoin ecosystem also suggests that the entire ecosystem is sensitive to the vagaries of crypto finance, rising and falling with the market.”
IMF discusses how to avoid stablecoin ‘bank runs’
Finally, the International Monetary Fund (IMF) followed up its recent report on tokenized finance with a new working paper titled “Making Stablecoins Stable.” The paper highlights the need for “safe” fiat reserve assets underpinning stablecoins and the resulting trade-off “between maintaining stability and incentivizing issuance.”
The paper notes the potential for “runs” on stablecoin assets, like the one in March 2023 that caused Circle’s USDC to slip its 1:1 peg with the dollar and fall to $0.87. That plunge followed the demise of Silicon Valley Bank (SVB), where Circle had parked $3.3 billion of its cash reserves.
The IMF authors offer three options to minimize the risks of runs, including (a) requiring issuers to hold “very safe and liquid assets,” (b) requiring issuers to hold “additional loss-absorbing equity,” and (c) providing “public backstops to ensure issuers can honor redemptions even in crisis times,” including “a form of deposit insurance, access to central bank liquidity standing facilities, and emergency lending.”
The U.S. Federal Deposit Insurance Corporation (FDIC) recently offered its recommendations for implementing the stablecoin-focused GENIUS Act, under which stablecoin issuers’ reserves would be eligible for deposit insurance, but stablecoin holders wouldn’t enjoy the same privileges.
The IMF warns that the risks of stablecoin insolvency increase when issuers hold riskier assets with unstable valuations. The IMF singles out Tether, which counted nearly $50 billion in non-traditional assets (gold, BTC, ‘secured loans’) in its $193 billion worth of reserves as of December 31, 2025. (A desire to purge these riskier assets could explain why Tether is currently trying to raise billions of dollars in cash from outside investors.)
The IMF concludes that issuers should be required to hold “safe and liquid” central bank reserves, generating revenue from their remuneration. This wouldn’t fly in the U.K., where the government has proposed requiring issuers to hold 40% of their reserves in unremunerated Bank of England accounts.
The IMF also suggests issuers could boost revenue by “data utilization,” aka selling transaction data to third parties like any other digital platform, provided such activity is lawful where the data is collected. Apart from the resistance this would likely face from users, the IMF notes that this would favor “larger providers due to scale and network economies related to data analysis, potentially leading to market concentration.”
For the record, Tether and Circle already claim a combined 84% share of the stablecoin market, so we humbly suggest that ‘concentration’ ship has sailed.
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