Following a significant exploit that resulted in the loss of over $270 million in client assets, Drift Protocol has announced plans to relaunch with USDT as its new settlement layer, courtesy of a substantial funding package of up to $147.5 million from Tether and its partners. The package, which includes $127.5 million from Tether and $20 million from other partners, is designed to facilitate 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 comprises 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 sparked criticism towards Circle for its perceived reluctance to halt the money transfer after the exploit, with the attacker transferring approximately $232 million in USDC from Solana to Ethereum using Circle's cross-chain transfer protocol.
Circle's CEO, Jeremy Allaire, later explained that the company only freezes USDC wallets when directed by law enforcement or courts, citing legal risks. In contrast, USDT has demonstrated a greater ability to freeze 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 significant.
The move is part of an intensifying stablecoin competition, with exchanges, fintechs, and traditional financial institutions vying to control the on-ramps, liquidity, and settlement layers underpinning digital asset markets. While USDT still dominates the stablecoin market, Circle's USDC has been gaining share due to regulatory alignment and growing institutional use.
With the new funding package, Tether plans to fund 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. The move positions USDT at the center of Drift's trading infrastructure, providing a pathway to restore user funds and resume operations.