Tether Pledges $150M for Drift Recovery, Drift to Drop USDC
Circle's USDC allowed hackers to bridge out $285 million stolen from Drift Protocol without intervention, fueling criticism over its non-freezing policy. Tether pledged $150 million in a revenue-linked credit facility and grants for user recoveries, while Drift will replace USDC with USDT and issue recovery tokens.
1. The $285M Drift Hack and Circle's Non-Freezing Policy
On April 1, hackers exploited governance controls to drain $285 million in crypto from Drift Protocol. They used Circle's Cross-Chain Transfer Protocol to bridge stolen USDC without a freeze from Circle, which sparked widespread criticism of its policy on asset intervention.
2. Tether's $150M Recovery Plan
Tether and unnamed partners committed roughly $150 million via a revenue-linked credit facility, ecosystem grants and loans to market makers. The funds will seed a dedicated recovery pool designed to partially reimburse Drift users affected by the exploit.
3. Drift's Pivot from USDC to USDT
As part of the recovery framework, Drift announced it will replace USDC with Tether's USDT as its core settlement asset. The protocol plans to issue transferable recovery tokens representing claims on the user compensation pool.
4. Implications for Circle and USDC Adoption
The hack and subsequent shift by Drift threaten USDC's reputation and market share in DeFi. Investors may scrutinize Circle’s policy on asset freezing and its ability to maintain confidence among protocol partners.