Stablecoin censorship

[yazher]

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.

[devil-soul]

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

[Abiky]

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.

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

[Blitzboy]

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.

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.

[DapanasFruit]

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.

[karabiber]

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.

[albon]

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).

Thoughts?  

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.

[Abiky]

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.

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?

[lyw123]

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.

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?

[sana54210]

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?

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.

[Abiky]

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?

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.