Key Takeaways:
Tether is providing up to $127.5 million in a credit facility to backstop the recovery of Drift Protocol, a Solana-based decentralized exchange that lost roughly $285 million in a hack linked to North Korea. The move is part of a larger $147.5 million recovery package for the DEX.
"USDT is not a safe haven for illicit activity,” said Tether CEO Paolo Ardoino, in a recent statement regarding a separate asset freeze. “When credible links to sanctioned entities or criminal networks are identified, we act immediately and decisively."
The recovery funding follows an April 1 exploit where attackers drained Drift’s funds. The new plan, structured as a revenue-linked credit facility, will repay user losses over time from Drift’s trading revenue. While Tether provides the lion's share of the funding, the total package amounts to $147.5 million with other partners.
The deal marks a significant strategic victory for Tether in its rivalry with Circle. Drift, one of Solana’s largest protocols with over 128,000 users before the hack, will now use USDT as its primary settlement stablecoin, abandoning USDC. On the Solana network, USDC has a market cap 2.65 times larger than USDT, making this a major shift in the competitive landscape.
Tether's intervention highlights a growing divergence in strategy among stablecoin issuers when dealing with illicit funds. The company has actively collaborated with law enforcement, recently freezing $344 million in USDT on the Tron network in coordination with U.S. authorities. This brings its total frozen assets to over $4.4 billion globally.
Circle, the issuer of USDC, has adopted a more cautious approach. Following the Drift hack, the firm faced criticism for not freezing $232 million in stolen funds that were moved using its own cross-chain protocol. Circle defended its inaction, stating it can only freeze assets when required by law enforcement or a court order. That stance has since led to a class-action lawsuit being filed against the company. Tether's bailout and subsequent stablecoin flip on Drift serves as a direct challenge to Circle's market position on one of DeFi's most active blockchains.
This article is for informational purposes only and does not constitute investment advice.
