Drift Protocol, recently victimized by a North Korean exploit, has announced plans to relaunch with Tether's USDT as its new settlement layer after securing a significant funding package of up to $147.5 million from Tether and its partners. The package, which includes up to $127.5 million from Tether and $20 million from other partners, is designed to support user recovery efforts following the April 1 exploit and to reboot the platform as a USDT-based perpetual futures exchange on Solana.
Notably, Drift is shifting away from Circle's USDC, which was previously used as its settlement layer. The rescue package comprises a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital being directed towards a recovery pool aimed at covering approximately $295 million in user losses over time.
The funding comes in the wake of a North Korea-linked group infiltrating Drift Protocol, posing as a quantitative trading firm for about six months before executing an exploit that exceeded $270 million on April 1. Since the exploit, Drift's governance token, DRIFT, has seen a significant decline of about 70% in value. The incident also drew criticism towards Circle for its perceived hesitance in halting the money transfer after the exploit, with the attacker successfully moving about $232 million in USDC from Solana to Ethereum using Circle's cross-chain transfer protocol.
Critics argued that Circle could have acted faster to blacklist wallets and freeze funds, thereby preventing or slowing down the attacker's ability to move assets. However, Circle's decision not to take such actions was reportedly due to legal risks. In contrast, USDT has demonstrated a more agile approach to freezing funds linked to hacks or illicit activities in the past. As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and approximately $150 billion in cumulative trading volume, Drift's transition to USDT marks a significant development in the stablecoin market.
The competition among stablecoins is intensifying, with exchanges, fintechs, and traditional financial institutions vying to control the on-ramps, liquidity, and settlement layers that underpin digital asset markets. While USDT still maintains a substantial lead, with roughly $185.5 billion in supply compared to USDC's $78.6 billion, Circle's USDC has been gaining ground through regulatory alignment and growing institutional adoption.
The new funding package also enables Tether to support fee reductions and user incentives tied to Drift's transition to USDT, as well as provide liquidity support to designated market makers to bolster trading depth at relaunch. This strategic move positions USDT at the core of Drift's trading infrastructure, offering a pathway to restore user funds and resume operations.