Circle’s Compliance Claims Contradicted by North Korean Crypto Flows
July 1, 2025 – Blockchain investigator ZachXBT has accused Circle’s USDC stablecoin of serving as the "primary infrastructure" for North Korean IT workers to receive illicit payments, with recent volumes exceeding "high eight figures" (tens of millions USD). In a scathing social media post, he criticized Circle for inaction despite branding itself as compliant.
Allegations of Systemic Failures
ZachXBT’s claims spotlight a stark contradiction: Circle is simultaneously pursuing a U.S. national trust bank charter to manage its USDC reserves while allegedly ignoring sanctions evasion. According to the investigator:
They currently do NOTHING to detect/freeze the activity while boasting about compliance.
This surfaces days after the Department of Justice (DOJ) charged North Korean operatives for infiltrating U.S. firms using stolen identities, funneling salaries to fund weapons programs. Prosecutors confirmed workers accessed sensitive military data.
Circle’s Regulatory Push vs. Reality
The stablecoin issuer, which went public in June (NASDAQ: CRCL), has aggressively positioned USDC as the "world’s largest regulated stablecoin". Its banking license application to the Office of the Comptroller of the Currency (OCC) aims to align with the pending GENIUS Act for stablecoin oversight.
Yet ZachXBT’s allegations suggest enforcement gaps. While Circle touts partnerships with regulators and publicly refuted ties to Hamas financing in 2023, it faces new scrutiny over North Korea’s exploitation of USDC. The Lazarus Group – Pyongyang’s cyber-arm – has stolen $5B+ in crypto since 2017, per U.S. authorities.
Market and Legal Fallout
Circle’s stock (CRCL) fell last week amid broader sell-offs, though analysts like Bernstein recommend buying dips. The DOJ’s "DPR RevGen Initiative" recently seized $7.74M in USDC tied to Pyongyang, revealing laundering via NFTs and OTC brokers.
Unlike Tether, which froze funds in the DOJ case, Circle faces questions about proactive monitoring. Its trust charter bid now hinges on demonstrating rigorous sanctions enforcement. As Jeremy Allaire, Circle’s CEO, stated:
We’re taking proactive steps to strengthen USDC infrastructure... aligning with emerging U.S. regulation.
Expert Reactions
David Carlisle, Elliptic VP: "Stablecoins’ traceability should aid compliance, but issuers must act on blockchain intelligence."
Senator Elizabeth Warren’s office (previously critical of crypto): "We’re reviewing allegations. The GENIUS Act mandates zero tolerance for sanctions evasion."
What’s Next
The OCC’s 120-day review of Circle’s banking charter will weigh these compliance failures. Meanwhile, the House prepares to vote on the GENIUS Act, which could mandate real-time stablecoin freezes.
For context on Lazarus Group’s crypto operations, see our complete hack timeline.
Additional Resources: