Crypto exchange HTX has announced it will delist USD1, the stablecoin linked to the Trump family, after its issuer World Liberty Financial (WLF) froze HTX-linked on-chain addresses, citing UK sanctions compliance. According to The Block, this is a rare public case of a stablecoin issuer proactively freezing the assets of a centralized exchange. USD1 is the dollar stablecoin launched by WLF, and the conflict this incident exposes is not a problem unique to USD1 — it’s that all centralized stablecoin issuers, including USDT, USDC, and USD1, retain the technical ability to unilaterally freeze any address.
What This Means for the Card in Your Pocket
The direct conclusion first: the USDT you top up onto your card sits at some on-chain address custodied by your card issuer or its partner wallet. In theory, Tether could use the same mechanism WLF used against HTX to freeze that address. This is not a flaw unique to USD1 — it’s a shared underlying design feature of centralized stablecoins.
But there’s a gap between “can theoretically be frozen” and “will actually freeze you,” and that gap is your card issuer’s compliance architecture. How much exposure you have depends on which card you use:
- Custodial / exchange-affiliated cards (e.g. Bybit Card): your USDT balance is tied to the compliance risk of the exchange entity itself. If that exchange entity ends up on a country’s sanctions list, the shortest transmission path leads straight to a frozen balance.
- Independent card-issuing aggregators (e.g. our editorially selected MPCard Asia Elite, or RedotPay): these typically use a top-up-and-deduct settlement structure, so USDT spends less time sitting on-chain, reducing exposure to a “whole-pool freeze” — but this still depends on whether the issuer segregates user assets into individual addresses rather than pooling them into one large hot wallet.
Expected timeline: USD1 holders on HTX should complete withdrawal or conversion within 7 days. For other stablecoins (USDT/USDC), there is no known freeze action in the near term, so there’s no need for panic withdrawals. But over a 90-day horizon, it’s worth watching whether card issuers update their terms around “asset segregation” and “response to issuer freezes.”
Historical Comparison: How Is This Different from 2022 and 2023
Stablecoin freezes are nothing new. After OFAC sanctioned Tornado Cash in 2022, Circle froze roughly 75,000 USDC worth of related addresses — a landmark case of an issuer complying with US sanctions. In March 2023, USDC briefly de-pegged to $0.87 due to Silicon Valley Bank exposure — that was a “reserve risk,” not a “freeze risk.”
The USD1 incident this time differs from both of those precedents:
- Similar to the 2022 USDC freeze: both were proactive freezes by the issuer under a sanctions framework (US OFAC in one case, UK sanctions in the other).
- The difference: in 2022, Circle froze addresses belonging to sanctioned “end users”; this time, WLF froze an exchange’s operational address, indirectly affecting all coin-holding users on that exchange — a much broader transmission surface.
- Different from the 2023 de-peg: USD1 hasn’t de-pegged — the money is “still there,” it just “can’t move.” For a card that settles against on-chain balances, a freeze is more dangerous than a de-peg, because with a de-peg you can at least sell at a discount, whereas a freeze means a total loss of liquidity.
Compliance Boundary: Freezing Is “Explicitly Permitted”
Many users mistakenly assume stablecoin freezes sit in a legal gray zone. The opposite is true: in most jurisdictions, an issuer freezing an address under a sanctions order is explicitly legal, and in fact often mandated. WLF’s invocation of UK sanctions compliance, and Tether’s public listing of frozen addresses on its official transparency page, both fall squarely into the “explicitly permitted” category — not a gray zone.
The gray zone lies elsewhere: as a cardholding user, if you unknowingly receive a “tainted” batch of USDT, whether you get frozen along with it lacks a unified standard. Hong Kong and Singapore have taken a clearer regulatory stance on this; cross-border users are advised to consult the Hong Kong Compliance Guide and Singapore Compliance Guide regarding stablecoin asset-segregation requirements. The clearly prohibited boundary, on the other hand, is this: you may not deliberately mix coins to evade sanctions — this is a red line on which every jurisdiction agrees.
What to Watch Next
- HTX’s USD1 withdrawal deadline announcement: watch for whether an official specific delisting timetable and redemption ratio is published.
- Whether WLF expands the scope of the freeze: if it moves from a single counterparty (HTX) to other exchanges, that would signal sanctions enforcement entering a new phase.
- Tether / Circle’s response: watch whether mainstream stablecoin issuers update their freeze policies or transparency disclosure frequency in response to this incident.
- Updates to card issuer terms: over the next 30 days, watch whether the card you use adds new language on “issuer freeze disclaimers” or “asset segregation” to its user agreement.
Editorial Recommendation
- Users who don’t hold USD1: this incident does not affect the USDT/USDC balance on your card. No action is needed, and there’s no reason for a panic withdrawal.
- Users holding USD1 on HTX: follow HTX’s official announcements and convert USD1 to USDT/USDC, or withdraw to a self-custody wallet, within the delisting window.
- Users currently choosing a card: add “does the issuer segregate user assets on-chain” and “does it use top-up-and-deduct settlement to minimize USDT dwell time” to your selection criteria. See 5 USDT Cards Worth Using in 2026 for reference, and prioritize solutions with a transparent settlement structure and short on-chain dwell time.
- What not to do: don’t scatter your assets across multiple obscure, minor stablecoins in an attempt to “dodge freezes.” USD1 is proof, if anything, that the newer and more aggressive a stablecoin’s compliance architecture is, the higher its single-point freeze risk. Sticking with the deepest-liquidity, most freeze-transparent USDT remains the more prudent choice for now.
- Don’t do this: don’t fragment your holdings across multiple obscure minor stablecoins to “dodge a freeze” — USD1 is proof, if anything, that the newer a stablecoin is and the more aggressive its compliance architecture, the higher its single-point freeze risk. Sticking with the USDT that has the deepest liquidity and the most transparent freeze record remains the more prudent choice for now.
The convenience of stablecoins rests on the premise that a centralized issuer is willing to remain neutral. The USD1 incident is a reminder to every card user: what you hold is not “cash” — it’s “a debit voucher the issuer can report lost at any time.” Keep that in mind before deciding how much money to leave sitting on-chain long-term.