Court lifts $12.5M freeze on Zama cUSDC

A U.S. court has lifted a temporary freeze on roughly $12.5 million in USDC held in Zama’s cUSDC smart contract, restoring access to the funds and allowing the protocol to resume normal operations.

Zama co-founder Rand Hindi wrote on X that the deposit at the center of the dispute was made on May 11 and represented more than 99% of the contract’s shielded value. The funds had been frozen after the stablecoin issuer acted on a court order linked to an unrelated legal dispute.

The court concluded the blanket freeze of the pooled contract caused disproportionate harm to users who were not involved in the litigation, according to Zama’s chief operating officer Jeremy Bradley. Zama showed that its confidential protocol keeps sender and recipient addresses visible while encrypting balances and amounts, enabling the disputed account to be isolated and frozen without interrupting other users.

Following the court action, Zama said it will speed up a planned compliance roadmap. Under the proposed framework, if an issuer freezes a USDC address, the corresponding confidential USDC held by that address would be frozen automatically within the cUSDC system. The company also plans to form a compliance council and add transaction-monitoring and enforcement tools to allow targeted actions without disabling entire pools.

Jeremy Bradley wrote, “We always designed the protocol with programmable compliance in mind,” and added that making those tools available is now more urgent to meet institutional requirements. Zama confirmed it intends to launch cUSDC later this month and will shield $5 million of USDC from its own treasury as part of the rollout.

The episode highlights a technical and legal tension between privacy-focused blockchain designs and centralized stablecoin issuers that can freeze assets under court orders. Zama has framed its accelerated compliance work as a way to enable targeted enforcement while maintaining the protocol’s privacy features.