BitGo has frozen USD1 tokens held at a blockchain address linked to stolen funds, while saying it found no security issue in its own systems.

The action was reported on Oct. 29, 2026, and is described as temporary. The designation leaves open the possibility that the tokens could later be released, drained, or otherwise reallocated.

BitGo's role in the freeze

BitGo is the exclusive issuer and reserve custodian for USD1, the stablecoin associated with World Liberty Financial (WLFI). The freeze applies to a single flagged address connected to stolen assets.

USD1's operating responsibilities are divided between the two organizations. WLFI owns the USD1 brand and manages compliance actions, while BitGo handles issuance and holds the reserves backing the token.

USD1's smart contracts include mechanisms designed for situations such as this one. Authorized parties can freeze an address, and on certain blockchains, frozen balances can be drained or reallocated at BitGo's discretion. The action is therefore consistent with USD1's existing compliance framework, which allows addresses to be blocked for legal or risk-related reasons.

Previous USD1 freezes

Freezes have not been a regular occurrence for USD1. In March 2025, one token was frozen on BNB Chain.

A more substantial incident occurred in June 2026, when WLFI froze addresses connected to a delisting by HTX. That episode underscored the compliance challenges involved in operating a stablecoin across multiple exchanges and blockchain networks.

Supply declines as WLFI prepares a new trust company

USD1's supply declined by roughly $400 million, or 9%, to approximately $4 billion as redemptions increased through mid-October 2026. Separate figures placed the stablecoin's market capitalization at about $4.02 billion after net redemptions of approximately $385 million earlier that month.

At the same time, WLFI is preparing to bring more of USD1's operations in-house. On Aug. 14, 2026, the company received conditional preliminary approval from the Office of the Comptroller of the Currency (OCC) to establish the World Liberty Trust Company.

The trust company is expected eventually to take over USD1 issuance and custody from BitGo. The approval includes a minimum capital requirement of $20 million.

Implications for USD1 holders

The immediate effect on ordinary USD1 holders is limited because the freeze affects one flagged address. BitGo also said that no security vulnerability was found in its systems.

Although stablecoins such as USD1 operate on public blockchains, they are not decentralized in the same way as Bitcoin. A custodian can freeze balances and, on some chains, move them.

The planned transfer of issuance and custody from BitGo to the World Liberty Trust Company could alter the current division of responsibilities. If WLFI controls both the brand and issuance, the separation between the party that flags an address and the party that freezes it would effectively disappear.

The status of the frozen tokens remains one point to monitor, since USD1's contracts permit draining or reallocating balances on certain chains. USD1's supply and redemptions are another consideration, particularly if supply falls below the approximately $4 billion level. The timing of the World Liberty Trust Company's transition from conditional approval to issuing tokens is also unresolved.

For now, BitGo's position is limited: one address linked to stolen funds has been frozen, and the company says its own systems were not compromised.

Source: CryptoBriefing

Disclosure: This article was edited by John Chen. For more information on how CryptoBriefing creates and reviews content, see its Editorial Policy.