The money will be used by Drift to recover user funds after more than $270 million in clients assets were exploited this month, and will relaunch the protocol as a USDT-based perpetuals DEX on Solana.
What to know:
- Tether proposes up to $127.5 million, and other partners propose up to $20 million, to back the recovery of user funds and the protocol’s relaunch.
- Drift to use USDT as its core settlement layer, with incentives and liquidity support, replacing Circle’s USDC.
- The revenue-linked structure of the funding aims to repay around $295 million in user losses over time.
Drift Protocol, the victim of a recent North Korean exploit, plans to relaunch with Tether’s USDT as its settlement layer after securing a proposed funding package of up to $147.5 million from the stablecoin issuer and partners, the companies said on Thursday.
The deal includes up to $127.5 million from Tether and $20 million from the other partners, structured to support user recovery following Drift’s April 1 exploit and to reboot the platform as a USDT-based perpetual futures exchange on Solana. Previously, the platform used Circle’s stablecoin USDC as its settlement layer.
The rescue package combines a revenue-linked credit facility, ecosystem grants and loans to market makers. A portion of trading revenue, alongside committed capital, will be directed to a recovery pool aimed at covering roughly $295 million in user losses over time.
The funding comes after a North Korea-linked group infiltrated Drift Protocol, posing as a quantitative trading firm for about six months before carrying out an exploit that was more than $270 million on April 1. Drift’s governance token, DRIFT, has lost about 70% of its value since the exploit.
Circle came under fire from the crypto community for its seeming unwillingness to halt the money transfer after the exploit. The attacker moved about $232 million in USDC from Solana to Ethereum using Circle’s cross-chain transfer protocol. Some critics, including blockchain investigator ZachXBT, said Circle could have moved faster to blacklist wallets and freeze funds to prevent (or at least slow down) the attacker from moving the assets.
However, Circle’s didn’t take any such actions due to legal risks.
Its CEO, Jeremy Allaire, later said that his company freezes USDC wallets only when directed by law enforcement or courts, not in real time during hacks. The approach reflects Circle’s broader strategy to align closely with regulators and institutions.
Its rival, USDT, meanwhile, is more nimble at freezing funds. The stablecoin issuer has repeatedly frozen assets linked to hacks or other illicit activities previously.
Drift is the largest decentralized perpetual futures exchange on Solana, with more than 175,000 users and roughly $150 billion in cumulative trading volume. Founded in 2021, it offers perpetuals, spot trading, lending, borrowing and cross-margin trading.
Stablecoin war
Competition in stablecoins is intensifying as exchanges, fintechs, and traditional financial institutions race to control the on-ramps, liquidity, and settlement layers that underpin digital asset markets.
Circle’s USDC has been steadily chipping away at Tether’s long-standing dominance of the stablecoin market, gaining share on the back of regulatory alignment and growing institutional use.
While USDT still leads by a wide margin, according to CoinDesk data, with roughly $185.5 billion in supply versus about $78.6 billion for USDC, Circle’s transaction volume outpaced Tether’s in recent months as its market share expanded.
With the new funding package, Tether also plans to fund fee reductions and user incentives tied to Drift’s transition to USDT, while extending liquidity support to designated market makers to bolster trading depth at relaunch.
Drift said the move positions USDT at the center of its trading infrastructure while providing a pathway to restore user funds and resume operations.