Crypto: Freedom, Subject to Terms and Conditions

During major hacks, stablecoin issuers can remotely freeze billions of dollars. A private justice system with neither judge nor deadline, earning them hundreds of thousands of dollars in interest every day.

Freezing stolen loot protects victims. Wrongfully freezing someone’s savings can stop them from paying their rent. Between the two, establishing clear rules and legal recourse is imperative. This is the standard by which I judge the crypto industry’s promises of freedom.

On the evening of October 29, Binance—the world’s leading cryptocurrency exchange—was hacked, with $6.3 billion stolen in twenty minutes. The FBI blamed a North Korean group; Pyongyang denied it. While this heist does not indict the Bitcoin protocol itself, it is a stark reminder of the cost of relying on a custodian: Binance suspended all withdrawals for nearly two days before restoring 98% of customer assets out of its own pocket. Yes, out of its own funds, because the stolen loot itself never came back.

Thirty-seven minutes

What happened next is far more instructive than the theft itself. Thirty-seven minutes after the funds hit the thieves’ wallets, Tether executed its first major freeze, followed minutes later by Circle. Together, the issuers of the two dominant digital dollars, USDT and USDC, immobilized nearly $2.4 billion—rising to $3 billion once smaller issuers followed suit. Anticipating this move, the thieves dumped their tokens within the hour for Ether—which no one can freeze—even at the cost of losing up to a quarter of their haul’s value in the process. The looters had, in fact, read the terms of service more carefully than the customers.

I obviously welcome the freezing of stolen funds, yet we still need to ask who immobilized them. The answer is elementary: it was certainly not the decentralization cherished by crypto enthusiasts that stopped these assets, but private companies equipped with a kill switch. The case of Ether proves the point: its protocol allows no one to freeze funds, yet the FBI published hundreds of suspicious addresses to be blacklisted and flagged by exchanges and intermediaries. Wherever assets are frozen, there is always a central actor holding a switch that works the same way for everyone.

A switch that pays

And that switch generates a return. Each token is backed by a dollar of reserves invested mostly in US Treasury debt, whose interest goes to the issuer—never the holder. It is to these investments that Tether owes the $1.5 billion profit it made in the second quarter. A frozen token is no exception: so long as it is neither burned nor reissued to victims, its underlying reserve remains invested while its holder can neither sell nor redeem it. With Treasury yields near 4%, $3 billion in frozen assets generates roughly $300,000 a day. The contracts (such as Circle’s) are explicit: no interest for the holder, no exception for frozen tokens—the yield goes to whoever flips the switch.

The issuer thus decides on the freeze, sets its duration, handles the appeal, and pockets the interest.

Judge, custodian, and beneficiary

Under such circumstances, there is little incentive to lift a freeze quickly. According to blockchain analytics firm BlockSec, only 3.6% of addresses frozen by Tether in 2025 were subsequently unfrozen, and two lawsuits filed in New York illustrate the stakes. Payment firm Conduit claims that $2.76 million of its corporate treasury has been frozen since September 2025, even though the Brazilian police—to whom Tether referred the company—never targeted its address. Meanwhile, two Thai businessmen, who say they were never Tether customers, are challenging the freeze of $42.4 million, imposed for over three months and, according to them, prior to any court warrant. Tether disputes the claims and no judge has ruled yet, but both lawsuits demand the exact same restitution: the yield generated by the reserves during the freeze. The plaintiffs understood—before the regulators—where the money was.

The lesson of this hack is not that crypto has failed, but that it has been betrayed by its intermediaries. When a handful of private companies can immobilize billions in minutes, dictate the duration of the freeze, keep the interest on the reserves, and unilaterally decide the fate of appeals, “decentralization” looks mostly like a marketing slogan.

The problem is not the ability to freeze stolen loot, but the power to freeze savings without a judge, without a binding deadline, and without accounting for the revenue generated while the funds are locked up. So long as that power remains a private, discretionary, and profitable decision, the freedom promised by crypto will itself remain subject to terms and conditions.