The crypto industry has spent the past day congratulating itself for the speed with which stablecoin issuers and other parties froze portions of the roughly $6.3 billion that left Binance wallets in the largest crypto theft on record on Thursday. Roughly $3 billion of that has been verified as frozen on various blockchains, according to the exchange. While the response from various crypto industry participants likely blocked billions of dollars worth of crypto theft, it has also reminded everyone that much of the supposed decentralization found in this space is more theater than technical reality.

Indeed, Binance itself is a centralized honeypot that holds customer assets in hot wallets controlled by the company, and the measures implemented by the exchange and other parties once the hack became apparent were reminiscent of what traditional banks use when something goes wrong. Most notably, Tether froze more than 1.567 billion USDT and Circle froze more than 800 million USDC, according to TRM Labs. Additionally, Trump-affiliated World Liberty Financial froze tens of millions of USD1, and Arbitrum’s Security Council intervened to move approximately $30 million in ETH and ARB out of the attacker’s control on the Ethereum layer-two network. According to Binance co-founder Yi He, Ripple also froze roughly $200 million worth of assets. While the industry treated the freezes as a success story, critics noted that the same tools undercut the technology’s original value proposition of removing trusted third parties from digital financial systems.

Tether froze more than 1.567B USDT related to a potential Binance exchange hack.

Protecting the industry and our partners is our main priority.

Stay safe everyone.

— Paolo Ardoino 🤖 (@paoloardoino) October 29, 2026

Circle’s action stood out in particular because the company has drawn criticism in the past for moving slowly or not at all after previous thefts. Earlier this year, Circle CEO Jeremy Allaire claimed that the company would not freeze USDC without a court order or direction from law enforcement. This time, Circle moved within roughly an hour of the first movements of hacked funds. Tether, on the other hand, has been involved in a large number of freezing actions in coordination with law enforcement in recent years, including funds associated with Iran, Venezuela, and other sanctioned entities.

Wasn’t Censorship Resistance Supposed to Be the Whole Point?

In response to the freezing of crypto assets related to the Binance hack, The Blind Spot Founding Editor Izabella Kaminska, who also previously covered crypto on a regular basis for the Financial Times, wrote on X that the freezes undercut the original innovation made by the creation of Bitcoin:

“Hmmm…. But I thought the whole point of crypto was censorship resistance and the inability of anyone to confiscate your money? (Apart from, it turns out, hackers, and all the centralised intermediaries lurking in the system in plain sight while pretending to be very different to banks). I’d suggest if it’s freezable it was always just another incarnation of tradfi. Not to suggest there’s anything wrong with freezing. There’s a very good reason why tradfi evolved with this capacity. It’s just not what the promise of crypto was. And now, increasingly, we can tell the difference. Moreover, it turns out there is value to friction!”

Amanda Fischer, chief operating officer and policy director at Better Markets and a former chief of staff at the Securities and Exchange Commission, made a similar point in her own X thread. She wrote that a big reason losses were mitigated is because Tether and Circle froze stablecoins, “which cuts against the whole crypto ethos and borrows from centralized systems supposedly anathema to crypto values.” She also added that stablecoin issuers freeze when convenient, sometimes claiming they need a court order and sometimes not. Fischer also claimed the whole episode underscored how unfit the crypto ecosystem remains for mainstream finance.

Over the past few years, the industry’s growing reliance on stablecoin issuers and other fintech companies has increasingly concentrated control over the crypto tech stack in fewer hands. Recently, this culminated in the development of what is effectively the fictional Ecoin from the television series Mr. Robot by way of Circle’s Arc blockchain. This overreliance on various points of centralization, which also includes corporate blockchains from the likes of Coinbase and Robinhood, could face greater scrutiny if Democrats perform well in the midterms next week and decide to reverse course on crypto regulation, including President Donald Trump’s own allegedly corrupt involvement in the industry, as already seen with the stalled Clarity Act.

To put it plainly, the reliance on centrally-issued stablecoins and recent push towards stock tokenization has many wondering how any of this is so different from the traditional financial system. Instead of “democratizing finance,” the crypto industry is now largely filled with centralized finance companies using blockchain technology to simply avoid regulation. As Satoshi Nakamoto wrote in the Bitcoin white paper, “the main benefits are lost if a trusted third party is still required to prevent double-spending.”

DeFi Often Retreats to Centralization

Of course, the recent Binance hack is far from the first time the crypto space has used centralized emergency powers after a hack. After the Kelp DAO exploit earlier this year, Arbitrum’s Security Council used its emergency powers to transfer roughly 30,000 ether (worth about $71 million at the time) from attacker-controlled addresses into a governance-controlled wallet. The move relied on off-chain coordination among a small group rather than an on-chain vote. Multiple blockchains also froze or rolled back activity after a $120 million Balancer exploit last year that worked in a manner similar to the scheme from Office Space.

inb4:

– @THORChain reports "record daily volumes"
– @Kruwed launders another $3,500,000,000 for North Korea (and @TheJusticeDept does nothing to stop him)
– "DeFi" saying "we are too decentralized to do anything about this, sorry"

I hope this is the hack this timeline changes.

— tanuki42 (@tanuki42_) October 30, 2026

THORChain in particular has recently faced criticism over the use of decentralization theater. After some incidents, including the $388 million Bitget hack, the protocol described itself as too decentralized to block individual swaps involving stolen funds. Yet, when THORChain itself was exploited for roughly $10 million earlier this year, node operators halted trading, signing, and global chain operations to contain the damage. Pseudonymous blockchain security researcher tanuki42 noted the tension shortly after the Binance incident, suggesting the industry should stop letting North Korea-linked actors move large sums through these kinds of systems while claiming there is nothing that can be done about it.

Bitcoin vs. ‘Crypto’

Of course, Bitcoin differs from many of these other crypto systems because there is no admin key, security council, or issuer that can freeze balances or reverse confirmed transactions. When Lorenzo Valente of ARK Invest publicly argued that rollbacks should be an option in response to hacks involving Bitcoin, Ethereum, and Solana going forward, the post made the reality of throwing away decentralization more explicit for those who treat immutability as optional. The post drew significant pushback from myself, Galaxy’s Alex Thorn, and others, particularly when it came to Bitcoin.

for Bitcoin: lol no

for Ethereum and other similar chains: they are already centralized around stablecoins anyway, so maybe better luck there. sort of already implemented there via the stablecoin layer.

— Kyle Torpey (@kyletorpey) October 30, 2026

The idea of overriding Bitcoin’s immutability is not new. After another previous Binance hack in 2019 that involved roughly 7,000 bitcoin (about $40 million at the time), then-CEO Changpeng “CZ” Zhao publicly discussed whether the exchange could push miners to reorganize the Bitcoin blockchain and reverse the theft. Zhao later said the exchange decided not to pursue it after speaking with various parties, citing risks to Bitcoin’s credibility and the potential for a network split. Zhao was mocked as “delusional” for thinking such a course of action was possible. He later described the Bitcoin ledger as “the most immutable ledger on the planet.”

Earlier this year, former Mt. Gox CEO Mark Karpelès also proposed a one-time hard fork to recover coins stolen from the exchange in 2011, a suggestion that was mostly just ignored by all relevant parties. More recently, Karpelès has been on a bit of a redemption tour via his work related to the supply chain attack on hardware wallet manufacturer Ledger.

The Binance Hacker Knew to Avoid Stablecoins

Of course, the Binance hacker still had a variety of useful crypto tools at their disposal to avoid seizure of some of their ill-gotten gains.

Before the stablecoin freezes were fully implemented, a wallet associated with the incident deposited roughly $60 million in USDT into DeFi protocol Aave and borrowed about 19,760 wrapped ether (roughly $45 million at the time). The borrowing step converted freezable stablecoins into unfreezable ether, the native crypto of Ethereum. Aave later froze new deposits and borrows across many of its markets as a precaution.

Bull Bitcoin founder Francis Pouliot noted the broader issue of freezable stablecoins sitting inside DeFi applications, posting on X, “Stablecoins as collateral in DeFi is kinda screwed if the issuers can freeze any coin you accepted to guarantee your loan. Listen I’m not an expert in shitcoinery but it seems like a pretty major design flaw.”