Bitcoin Forum

Have you ever found yourself a victim of stablecoin censorship? There are records of stablecoin issuers freezing or limiting access to stablecoin funds they deem suspicious. To my knowledge, both Bitfinex (issuer of Tether/USDT) and Circle (issuer of USD Coin/USDC) have been doing this for quite a while. If these entities do the exact same thing banks do, why are stablecoins rising in popularity? Investors could lose it all in an instant without even knowing it (unless they check the blockchain, of course).

See for yourself proof of stablecoin censorship here: https://dune.com/phabc/usdt---banned-addresses (https://dune.com/phabc/usdt---banned-addresses)

And here: https://dune.com/phabc/usdc-banned-addresses (https://dune.com/phabc/usdc-banned-addresses)


Thoughts?  ???

Stablecoins play an important role in the DeFi industry and helps immensely with liquidity of decentralized finance industry. However, the quirk you mentioned is particular to just centralized version of stavle coins. I feel like they do this in order to stay complaint with regulations.

A decentralized stablecoin like DAI doesn't have these type of mechanisms built in for censoring addresses.

The best thing to do is to not do anything with centralized stablecoin that would trigger addition to the blacklist or just use a decentralized stablecoin like DAI. Most of the addresses in those blacklists are addresses that contain hack funds.

Pretty much because they feel they did nothing wrong, so they just simply use it. We know that address censoring usually happens because there is a report of hacks-related funds or other illegal activities.

The deeper question is, does there are cases where stablecoins addresses are wrongly flagged? For example, the user did nothing wrong or illegal, but they got censored. If there are many cases as such, certainly, it won't achieve the current popularity. But if there isn't any or extremely rare, users would simply use it because there is a utility or use case. The possibility of censorship won't be a problem for them.

Stable coins are centralized and the issuers basically control everything about it, they can print as much as they want (even if it is backed by nothing), or they can freeze it in their customers' wallets if they have a reason to. Stable coins are growing in popularity because some people are ignorant of the risks that are associated with it, whilst others use it because they have to (especially traders). The thing is, irrespective of your reason for using stable coins; you should not hodl it for the long term, use it for whatever purpose you want and sell it for Bitcoins immediately after.

If you get your stablecoins frozen you have been using laundered or stolen money, you are a terrorist organization or a black listed person. They don't just freeze joe nobody's money.

And stablecoins are rising popularity is because it's easy to use them for trading in dexes. You can't do that with normal fiat money.
Sometimes it's just practical to convert into something less volatile like value of usd. Sure it's centralized but so is real fiat money. If you want to use money that's not going to be frozen, there still are decentralized currencies out there. But even those can be frozen in CEXes.

I wasn't. I never held stables for a long time, I've been only using them for some stuff. And I've heard how they froze only accounts of criminals.

I'm not really sure why they banned those address, however, I'm thinking that it could be link so darkweb or hacks or anything that harm anyone or crypto in general that's why they got it banned.

However, if you think that you are not doing anything wrong and you have a clean address then on my side, you don't need to be concern about stablecoin censorship. Unless they are like doing a witch hunt or something and just ban any addresses they like or find that suit their banning criteria.

Because they do not ban the movements of individuals as banks do, but rather ban major events such as hacking platforms, money laundering, and cross-border charges, but I do not remember hearing the news of freezing an individual account, despite their ability to do so.
If you are very concerned about this matter, use DAI. It is decentralized and no one can freeze the money in your account, but the possibility that its price is not $1 remains the biggest problem.

https://bitcointalk.org/index.php?topic=5204055.0

stablecoins except DAI can be frozen even if they are in your wallet.

That's a point and difference between banks and crypto. I think CEX is not doing any bad here because If dark money used in their exchange then CEX will be responsible for it and also will be blame. This is part of regulatory system. Freezing individual accounts happened so many times but this is just temporary and will back to the normal when user pass investigation process.

That's mean our stable coin other than DAI is not safe and what is about Dai on other networks such as Polygon, bsc. Dai is Ethereum network coin and we have to pay high fee. It's pigged tokens is available in other networks.. If we hold in matic , our coins could freeze?

A user account on a platform is different from a deposit address in a wallet. I meant the possibility of freezing coins if you withdraw them to your wallet, which is what happened several times after bridges or CEXs were hacked.
Inside the platform, you do not own your coins, but the money is controlled by the platform.


Yes, DAI cannot be frozen by the wallet or inside your wallet because it is decentralized. There is a group of auditors and you can contribute to the decentralization of the network if you have a lot of money and buy MakerDAO. The only problem is that its price may not always be equal to one dollar, which is a problem with all stablecoins.

Because they are less monitored than the reserves themselves, so far I have not found a case of stablecoin freezing below $5k even though it was proven to be the proceeds of crime.

Whoever doesn't want to deal with annoying bureaucracy just for a small transaction value, stablecoin can solve that. Meanwhile, what we know is that fintech services like Paypal can suspend your money even for $5 and they mark your bank account too.

There's a chance these are bad addresses. I am assuming. ;D
Think about it, they are a centralized business so they cannot just close down any count without proper reason on why they did it. It will mean their business will get a bad reputation if proven that they are holding down or freezing accounts without any good reason at all.
I don't disagree with stablecoins but I don't use the popular ones like USDT. If I have to pick a stablecoin I'd rather be in BUSD and I did a lot of transactions there when I was still playing DeFi games and NFT games so because I didn't have any problem using it I will just stick with them.
Anyway, it's centralized so we cannot expect much when it comes to protecting our privacy.

Of course stablecoins is much more convenient than transferring electronic cash through third party services like PayPal. The chance of freezing your funds is also very low. But you need to realise that stablecoins are a surrogate for the dollar and at one point it may all become illegal.

They are not attacking normal account, and they are just protecting their own people from a possible fraud or money laundering, seriously most of those stablecoin censorship are from a suspicious account and the exchanges have the right to do their investigation about your money. Well, stablecoin are still better compare to the banks and those exchanges are just executing their rules and regulations, aside from that I didn’t see any problem as long as they are doing it in process.

you can losing your entire balance, as happened with LUNA, or it may happen if the legal restrictions on these stable currencies are tightened, especially since we all know that they do not possess any reserves that would allow them to print more of these coins.
These are opposite things. If the stablecoin has a large market capacity, regulatory restrictions will increase on it, which may mean freezing even small deposits, and the stablecoin with a small market capacity does not have enough reserves to maintain the value of one dollar.

I've never encountered it, but I always try to protect myself from being subjected to blocking a substantial amount of my stablecoins. I always buy stablecoins on different services and use multiple addresses to do so. Never store centralized stablecoins on a single address, otherwise one questionable interaction with a service can result in the entire amount being blocked. Censorship and regulation in the crypto environment is constantly increasing, so you need to use risk diversification.

And who decides who is terrorist and who is not? Some states see the organizations as terrorists and others see same ones as heroes. The perspectives of people and countries may vary depending on their stand. Who can declare someone guilty without a fair trial?
This is one of the biggest problems of centralized systems. I trust stablecoins as much as I trust national currencies, maybe even less.

I really don’t understand why someone would hold a stablecoin instead of cash. It’s like you get additional regulatory risk on top of the typical crypto risk while also eliminating the ease of spending that USD has and the big topper is that you won’t ever get any appreciation like with other crypto. It’s the worst of all worlds.

Decentralized stablecoins might be an option. But most of them fail due to their inability to maintain the USD peg for long. No USD reserves = high risk of a collapse in the long run. I believe this applies for decentralized algorithmic stablecoins. I'm yet to see whenever collaterized stablecoins that are decentralized (eg: DAI, USDJ) will be able to maintain their peg forever. Life is all about risks, anyways.

Despite the on-going centralized stablecoin censorship, I don't think they will be going anywhere soon. Especially when most crypto exchanges and companies are behind them. They're better than traditional Fiat currencies because they can be frozen/manipulated at will. Not only that, but they're highly-programmable, allowing anyone to use stablecoins on "De-Fi" apps and more. I guess that's their main selling point over CBDCs (especially the programmability part). If stablecoin issuers only censor illegal activities on-chain, then should be nothing to worry about. But when things go too far, it's going to be a huge problem for everyone. Who knows if stablecoins will live alongside traditional cryptocurrencies for generations? ;D

The risks of holding stable coins are only increasing by the day, now that governments want to release their CBDCs the first coins they will want to target will be stable coins, because if people have easy access to stable coins which they have used for years already then why use CBDCs? So I really think that governments are going to begin to make the life of stable coins holders very hard, and when I consider all of those factors it makes less and less sense to keep holding stable coins.

I can already imagine the negative articles and lawsuits aimed at USDT and USDC but Banks would probably focus on private businesses as their main target users so these issuers of other stable coins can still have time to enjoy their profits. It's like CBDCs are for B2B while those private-backed are for P2P.

USDT and USDC are the two most notorious when it comes to stablecoin censorship. Ironically, they're also the two largest stablecoins in cryptocurrency. They're the easiest to use because they're accepted almost everywhere. This is also the reason why I used them many times even if I don't really like them for the reason that they easily freeze funds.

DAI is a better option but not as popular as them. There will definitely come a time when these censorship issues will make users realize how risky it is to use them and transfer to a better option. For now, most people just use whatever stablecoins are the top in the market.

This banned or stablecoins being frozen are common in some hacking incidents. Like in any centralized entities or even DeFi entities we have now in the cryptocurrency market.
It's just sad because the essence of cryptocurrency is being disregarded here, let's say for example if you are just normal person and your funds just got frozen without any doings, then it means you really don't own your cryptocurrency.

Well, besides BTC there are not so many currencies that are fully in your hands.

Stablecoin censorship? These issuers seem to have missed the idea of cryptocurrency. This behavior by Bitfinex and Circle is incomprehensible. What do they offer if they mimic bank restrictions? Dont you see the obvious contradiction?

Question the narrative being promoted. Why are investors buying stablecoins that seem to betray decentralization? Wheres the autonomy if every transaction and move is monitored? Its like receiving a golden cage. Though dazzling and tempting, its still a cage. Rise up, crypto community, and demand more from issuers. Otherwise, why bother?

Yes, I know that, but our discussion focuses on censorship, not the potential loss of value due to the badness of the stablecoin company itself.


Currently the total daily market cap of stablecoins has reached $123k billion (https://defillama.com/stablecoins), if we assume the number of retail users increases rapidly from today, I think the opposite is true, censorship is increasingly difficult to do for small values.

There is no contradiction. These companies offer the services for which there is a demand. Crypto users have a great demand to link cryptocurrencies and fiat. Fiat with cryptocurrency will never have a decentralized union, it's nonsense. The crypto community itself is to blame for the industry moving towards centralization. Because for most crypto users, the main idea of using cryptocurrencies is to exchange cryptocurrency for fiat as profitably as possible.

I agree. There is no contradiction. To remove censorship is a Bitcoin idea. But crypto has since grown in all directions, with a wider scope. Bitcoin is crypto, but crypto isn't Bitcoin. The growth of crypto didn't necessarily abide with the fundamental ideas of Bitcoin. The mere fact that crypto has produced a coin that represents fiat isn't what Bitcoin is all about.

If there is any contradiction, it is that the very people who claim to be pure and solid Bitcoin supporters are also using stablecoins like USDT and USDC that are centralized and actively censor their users.

Having a centralized stablecoin that's prone to censorship, certainly does not go well with crypto/Blockchain tech's core ethos. I can't imagine how disastrous it would be to combine such a stablecoin with "De-Fi". It's like bringing banks to the Blockchain. This introduction of a middleman or third-party, greatly brings us the single point of failure from centralized systems. Most people don't care about this because they only want to make money fast.

As I always say, convenience goes on top of everything else. I hope we get more decentralized alternatives to help make "De-Fi" truly censorship-resistant. Otherwise, crypto will be doomed to failure. The future is widely unpredictable, so we can only hope for the best. Just my opinion :)

Bitcoin is also trying to be censored. This is manifested in various AML checks, which are used by various services to fight, allegedly, against fraud. In the framework of P2P transactions it does not change anything, but we want bitcoin to be able to pay not only between users, but also to buy various goods and services in stores and on websites. In this respect, censoring bitcoin is possible because there is also a third party in this financial relationship, in the form of payment processors that have their own regulators and rules.

It's not Bitcoin that's trying to be censored, it's the governments that are trying to censor it. But yes I get your point.

But it's simply impossible regardless of all these AML checks, KYC, strict regulations, etc. If Bitcoin is not accepted at McDonald's for example because the government orders it, it's not Bitcoin that's censored but McDonald's. If a McDonald's branch resists and accepts Bitcoin, then Bitcoin can be used. It's because Bitcoin can't be censored.

This isn't the case with USDT and USDC. Their users can't use their tokens even if they want to because they're censored. Nothing like this can happen with Bitcoin.

There are risks involved with stable coins but since they have become a very important player in the cryptocurrency market they could not just be dismissed outright. I am using stable coin too and I find them to be convenient and can protect my gains while trading some digital assets. However, we know that stable coins are issued by centralized platforms and because of this fact alone they can easily do whatever they want...whether we agree or disagree with them. Now, am just wondering...is it not possible to have decentralized stable coin? Sorry if this can be just another naive question.

The market cannot exist without stablecoins, but the risk is that they are not backed by real assets. We can't be sure they are entirely transparent, but when investing in the cryptocurrency market, we should accept all the risks that the market may pose to us.

Why is that the market can't exist without stablecoins? Could you explain that more? The first stablecoins were issued only in 2014.

Stable coins perform their function relatively well, before they were created many of those that wanted to deal with cryptocurrencies found themselves in a difficult position once they wanted to sell their coins and send their profits back to their bank accounts, and it was not rare to hear stories of people getting their bank accounts blocked due to the transactions they received, so stable coins were a good way to avoid that scenario, but if governments begin to take legal action against them then their reason to exist will disappear and people will find themselves facing those problems again.

Exactly. Bitcoin can be used regardless of government censorship because of the way it was designed (decentralization). Stablecoins like USDC and USDT are more like credit/debit cards which can be censored at will. They're starting to look like CBDCs. I don't like the fact that these centralized stablecoins are used by "De-Fi" protocols. It greatly defeats the entire purpose of crypto/Blockchain tech. We should change the name from "De-Fi" to "CeDe-Fi" (Centralized/Decentralized Finance). Truly-decentralized finance would only use censorship-resistant alternatives to help eliminate the middleman from the system.

Despite the downsides of using centralized stablecoins, don't expect them to go anywhere soon. They will become bigger and stronger than ever, as long as "Wall Street" keeps supporting them. Who knows if they will become the new CBDCs everyone was talking about? :D

That's right, governments have been trying to censor bitcoin for a very long time. It is important for governments to control all financial flows and have leverage.


It's very possible. If you use bitcoin for P2P transfers, you don't need any censorship and AML checks, but as soon as you try to use bitcoin as a means of payment in traditional finance, your bitcoins can easily be censored. Mass Adoption will not happen without the global integration of bitcoin into traditional finance, i.e. banks, stores, services, etc. Bitcoins may well be censored when interacting with these entities.

That's the main selling point of Bitcoin. You can use it freely without background checks, or credit checks of any kind. No one can confiscate or freeze your funds at will, because of the way BTC was designed. With stablecoins, it is different. An issuing company (middleman) takes control of the distribution and supply of the coin itself. Smart contracts are coded in a way where the creator can simply add addresses to a "blacklist" if transactions are deemed suspicious. This feature makes stablecoins centralized and prone to censorship. It's like entrusting your money to banks. You don't see that coming with decentralized stablecoins such as DAI and USDJ. Developers can change the code to "comply with regulations" if they want to, but there's nothing stopping the community from creating a fork that puts enphasis on decentralization and censorship-resistance.

Despite the inherent flaws of centralized stablecoins, don't expect them to disappear anytime soon. They will continue to gather widespread support from banks and governments worldwide until they become "a force to reckon with". It's in "Wall Street's" best interests to keep stablecoins alive for a long time. As long as we have one decentralized cryptocurrency (Bitcoin), nothing else matters. Just my thoughts ;D

Probably the censorship of Tether or Circle is not great so far and they froze not many addresses. By the way, I haven't seen any freezing of accounts with small amounts. But probably as soon as CBDC appears, Tether and other stablecoins will have a serious reason to introduce serious censorship.

Centralization will not disappear, rather the opposite. With each new cycle, cryptocurrency will be embraced more and more fiercely by corporations, banks and regulators. Cryptocurrencies are no longer just a geek's toy, they are a huge trillion dollar market with growth potential. No one will allow such funds to move freely and uncontrolled around the world. Regulators have long been integrating their products and services to control the crypto industry, and we all obediently accept it. Look at the Worldcoin phenomenon, it's a cryptocurrency that people voluntarily carry their personal data into. These people don't even realize that cryptocurrency was created for privacy, not de-anonymization.

They are popular due to the fact that most people don't read about their disadvantages and they will just learn about it the hard way when their stablecoins are frozen due to some suspicious activities or transactions. I experienced how to have your assets frozen and it was not a good experience because I had a hard time explaining it to them finally I just need to send them a few documents in order to release my crypto assets in their exchanges. I guess when you have a huge amount of those stablecoins, you will gonna need some extra papers to prove them you are innocent before they let you use back your crypto. this is not the best altcoin to have for obvious reasons.

Unfortunately, the risk of freeze/blocking is real as there are centralized stablecoins but i believe they only do so in the case of large sums being moved or if there is suspicion of illicit use, the use of usdt is fundamental for traders at least

They are hunting down illegal activity in the timebeing. But be aware these stablecoins can go too far if governments pressure them to do so. You could easily get your funds frozen even if you weren't doing anything wrong. Just like how banks are doing today. I'd never trust a centralized stablecoin because of this. Tether, USDC, and the likes are all subject to the single point of failure.

Crypto is all about decentralization and censorship-resistance. We should do everything possible to adopt solutions which follow crypto/Blockchain tech's original vision. Not all the other way around. Wasn't Bitcoin created as an alternative to Fiat currencies (which are empowered by banks)? Then why bother bringing banks into the game by adopting centralized stablecoins? Just my opinion :)

Decentralisation is one of the most important ideas behind cryptocurrency. Thats what makes it powerful and different from other banking systems. It looks like stablecoins, especially centralised ones, are going against this big picture. Why would you use the flawed centralised banking system in a field that is proud of being decentralised?

I completely concur with your doubt. Thats exactly what the crypto community wanted to avoid: a single point of failure. If Tether, USDC, or any other centralised stablecoin gets value, arent we just getting a new gatekeeper? Sometimes it seems like we've forgotten why Bitcoin was made in the first place. The dream is a digital world without any one person or group controlling it. We need to keep pushing for solutions that stick to this concept and dont water it down.

We are now entering a new era of cryptocurrency as well as stablecoins with the interference of the government and the past experiences the market has had. In most cases, a stablecoin can be frozen when there can be legitimate question especially on its origin and this can happen if there is hacking or even maybe illicit business transactions. Now, of course, this is censorship and this is being encouraged by the government itself with the issuing entity always pressured to do so. We should always remember that stablecoins are products of a centralized platform hence that platform must toe the line with the government otherwise there is that risk of its business. And as we are seeing in the market today, stablecoins are playing a pivotal role in everyday transactions in the crypto-verse.

Stablecoins are not decentralized entities anyway and you should know that. If we take Op's point as a whole, he is absolutely right. If we are in the crypto market, we exist to increase our privacy. If the administrators of stablecoins are going to embargo whoever they want and whenever they want, it makes no sense. If you have concerns, you shouldn't use stablecoins.
DAI is an ideal cryptocurrency to stay anonymous. However, since it is not stable, it carries certain risks. There are various ways to remain anonymous in the crypto market but stablecoins are definitely not one of them. As we move away from the banking system, we will defend crypto against those who try to pull crypto into the traditional market.

Stablecoins, despite being centralized and subject to oversight by specific entities, often lack transparency, with many of them lacking audit reports, especially the USDT coin, which CZ, the founder of Binance, likened to being like a black box that remains opaque in its operations, and we do not know precisely the specific level of its Risks. Perhaps some stablecoins may even operate without regulatory oversight. They have the power also, as OP mentioned, to freeze any investor’s assets or restrict access to his stablecoins if they find any suspicion in his transactions, and even without clear explanations, this is also like what central banks are already doing, which contradicts the principles of blockchain technology and decentralization where makes you the primary controller of your assets without their authority over you. Despite the drawbacks of stablecoins that may lead to severe losses, investors and traders cannot do without them, as they offer a protective security against market volatility.

This is people's fault because they let greed drive their emotions. They forgot about what matters most (which is making money better by removing the middleman). Banks' failures in the past tells us they cannot be trusted to handle the world's economy. That's why Bitcoin was created in the first place. Bringing banks into crypto, is a terrible idea. It will only make them more powerful in the long run.

Using a stablecoin would be no different than using ordinary Fiat currencies (mainly the US Dollar). Entities in control of stablecoins can freeze or confiscate your funds at will, even if the underlying blockchain network is decentralized. That's because the smart contracts underpinning stablecoins are coded this way. It's all about making centralized stablecoins "regulatory compliant". If you want real freedom, I'd suggest you use a truly-decentralized cryptocurrency such as Bitcoin or Litecoin. As long as there are a few people resisting centralization, nothing should be able to stop the revolution. Who knows if crypto lasts for generations? :)

I noticed that the total trading amount of DAI per day on Binance and OKex is very very small. Will there be a problem of low liquidity if I hold DAI?

This is why I have never understood the idea of stablecoins to begin with. There are people who bought over 100 billion dollars worth of it from the stablecoin companies, which means that if Tether bankrupts or gets seized or anything, that's tens of billions of dollars gone from the market on a single day. Why would anyone trust a company like that?

I am not saying the yare a bad company, they could be the greatest company ever, but it just doesn't feel like it means anything at all, we shouldn't trust ANY company like that, you can be amazon, apple, tesla, I do not care how big you are, you are not that good and I won't trust you with tens of billions of dollars just to hold it. Government could take it in a single day if they wanted to and that would result with all of our money gone forever. I just don't trust government to be fair, not the companies, but I know companies are forced to follow the law of the government and that's the real issue with stablecoins.

Of course it is. DAI is not as popular as the aformentioned centralized stablecoins (USDC and USDT). You should expect low liquidity for DAI just because it's decentralized. If I'm not mistaken, you can find more liquidity in Uniswap. It's a DEX where you can swap DAI to any ERC-20 token living on the ETH blockchain.

Despite DAI's limitations, it's still a better choice than both USDC and USDT. There's no censorship of any kind. You and only you control access to your funds. The only risk would be DAI losing the USD peg once ETH and other crypto coins go all the way down the drain. After all, DAI is a collaterized stablecoin. If Maker (the issuer of DAI) has an emergency plan to protect DAI's USD peg, there should be nothing to be concerned about. With or without stablecoins, crypto will be here to stay for a long time. :)