The stablecoin's issuer says it found no security issue and is locking tokens at an address tied to stolen funds
BitGo has frozen USD1 tokens held at a blockchain address linked to stolen funds. The custodian also said it found no security issue on its end.
What BitGo actually did
BitGo is the exclusive issuer and reserve custodian for USD1, the stablecoin tied to World Liberty Financial (WLFI). The freeze targets tokens at a single flagged address connected to stolen assets.
The action is described as temporary. That leaves room for the tokens to be released or otherwise handled later.
The split in responsibilities is worth spelling out. WLFI owns the USD1 brand and manages compliance actions. BitGo handles issuance and holds the reserves backing the token.
USD1’s smart contracts were built with this exact scenario in mind. The code lets authorized parties freeze an address. On certain chains, it also allows frozen balances to be drained or reallocated at BitGo’s discretion.
The move fits USD1’s existing compliance framework, which includes provisions for blocking addresses for legal or risk reasons.
A short history of USD1 freezes
Freezes have not been a regular feature of USD1’s life so far. In March 2025, a single token was frozen on BNB Chain.
The more substantial episode came in June 2026. WLFI froze addresses linked to a delisting by HTX, highlighting the compliance headaches that come with running a stablecoin across multiple exchanges and chains.
The bigger backdrop: shrinking supply and a new trust company
As of mid-October 2026, USD1’s supply fell by roughly $400 million, or 9%, to about $4 billion as redemptions picked up. Separate figures put the market cap at approximately $4.02 billion, following a net redemption of around $385 million earlier that month.
Meanwhile, WLFI is preparing to take more of the operation in-house. On August 14, 2026, it received conditional preliminary approval from the Office of the Comptroller of the Currency (OCC) to establish the World Liberty Trust Company.
That entity is expected to eventually take over USD1 issuance and custody from BitGo. The approval comes with a minimum capital requirement of $20 million.
What this means for USD1 holders and the stablecoin market
For everyday holders, the immediate impact is limited. The freeze affects one flagged address, and BitGo says no security vulnerability was found in its systems.
Stablecoins like USD1 run on public blockchains, but they are not decentralized in the way Bitcoin is. A custodian can freeze balances, and on some chains, move them.
The coming handoff from BitGo to the World Liberty Trust Company adds another variable. Once WLFI controls both the brand and the issuance, the separation between who flags an address and who freezes it would effectively disappear.
A few things are worth tracking from here. First, whether the frozen tokens are eventually drained or reallocated, since USD1’s contracts allow that on certain chains. Second, whether redemptions continue to pull supply below the roughly $4 billion mark. Third, how quickly the World Liberty Trust Company moves from conditional approval to actually issuing tokens.
For now, BitGo’s message is narrow and deliberate. One address, linked to stolen funds, has been frozen, and the company says its own systems were never the problem.
