Following a significant exploit that resulted in the loss of over $270 million in client assets, Drift Protocol has announced plans to relaunch with Tether's USDT as its new settlement layer, thanks to a proposed funding package of up to $147.5 million from Tether and its partners. The deal comprises $127.5 million from Tether and $20 million from other partners, designed to support user recovery and reboot the platform as a USDT-based perpetual futures exchange on Solana. Previously, Drift utilized Circle's USDC as its settlement layer. The rescue package includes a revenue-linked credit facility, ecosystem grants, and loans to market makers, with a portion of trading revenue and committed capital allocated to a recovery pool aimed at covering approximately $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 executing the exploit on April 1. Drift's governance token, DRIFT, has lost around 70% of its value since the exploit.
The incident led to criticism of Circle for not halting the money transfer, with the attacker moving about $232 million in USDC from Solana to Ethereum using Circle's cross-chain transfer protocol. In response, Circle's CEO, Jeremy Allaire, explained that the company only freezes USDC wallets when directed by law enforcement or courts, citing legal risks. In contrast, USDT has demonstrated a more agile approach to freezing funds linked to hacks or illicit activities. As the largest decentralized perpetual futures exchange on Solana, with over 175,000 users and roughly $150 billion in cumulative trading volume, Drift's transition to USDT is seen as a strategic move.
The stablecoin market is becoming increasingly competitive, with exchanges, fintechs, and traditional financial institutions vying for control of on-ramps, liquidity, and settlement layers. While USDT still maintains a significant lead, Circle's USDC has been gaining ground, driven by regulatory alignment and growing institutional use.
The new funding package will also enable 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. This move positions USDT at the core of Drift's trading infrastructure, offering a pathway to restore user funds and resume operations.