Drift Protocol said Thursday that it is aligning itself with Tether as the stablecoin issuer supports recovery efforts linked to an exploit that cost users $285 million in crypto earlier this month.

In an announcement, the decentralized exchange said it is set to receive $127.5 million from Tether and $20 million from other partners, under a framework that includes a revenue-linked credit facility, an ecosystem grant, and loans to market makers.

As part of the arrangement, Drift Protocol plans to divert committed funds to a so-called recovery pool, in addition to the exchange’s revenue. Affected users are set to receive a transferable token that represents a claim on the recovery pool, Drift added.

The upshot is that Drift is ditching Circle’s USDC stablecoin when the exchange relaunches, recognizing Tether’s flagship USDT stablecoin as a core settlement layer. The El Salvador-based firm behind the $185 billion product is also expected to provide market-making resources.

In a blog post, CEO Paolo Ardoino said the firm’s work with Drift centers on “restoring user confidence and supporting a strong relaunch.”

Although Tether’s USDT has gained a reputation as a preferred vehicle for bad actors to move funds, the firm noted in the blog post that it works with 10 law enforcement agencies across 64 countries and has recovered $800 million in stolen crypto as a result.

Two weeks ago, when hackers linked to the Democratic People's Republic of Korea swiftly stole assets from the Solana-based Drift, onlookers watched as massive amounts of crypto flowed to Ethereum using Circle’s Cross-Chain Transfer Protocol, or CCTP—a process that took several hours.



Because Circle didn’t make an effort to freeze the funds that flowed through its protocol, the stablecoin issuer faced pushback online. Pseudonymous blockchain sleuth ZachXBT was among those who accused the company on X of essentially being asleep at the wheel.

Last week, an executive at Circle wrote in a blog post that the firm only freezes digital assets when it is required to do so by law, “not because we have decided, unilaterally or arbitrarily, that someone's assets should be taken from them.”

Conversely, Circle’s Chief Strategy Officer and Global Policy Head, Dante Disparte, described the U.S. Treasury Department's efforts to implement rules for stablecoin issuers under the GENIUS Act, a federal framework enacted last year, as a potential bright spot.

The Department urged Congress to consider a “hold law” in a report published last month, which would extend legal protections to institutions that “temporarily and voluntarily hold digital assets involved in suspected illegal activity during a short-duration investigation.”

Under a proposed rule, the Treasury has recently said that the GENIUS Act will require firms like Circle to build systems that combat money laundering and sanctions evasion. However, the hold law that the agency previously recommended wasn’t referenced.

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