[UPDATED] PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets

[Pmalek]

The information in this thread should be shared to spread awareness so I took the opportunity and translated your thread into Croatian for the local community to know.
The link to the translation is here > https://bitcointalk.org/index.php?topic=5204334.0

Thanks again.

[big_daddy]

^ I've done the same for the Italian Local Board https://bitcointalk.org/index.php?topic=5204358.0

Thank You for sharing this very important information

Best regards

[gentlemand]

The most notable refusals for redemptions have been Gemini and Paxos and in both cases it seems it was at least partly to - “maximize their status on CoinMarketCap.”

https://www.coindesk.com/winklevoss-crypto-gemini-gusd-stablecoin-redemption

https://www.ccn.com/paxos-standard-hassling-ethereum-traders-trying-to-redeem-stablecoin-pax-for-dollars/

Would you want your wealth tied up in something worried about how it looks on some piece of shit website?

When you consider how anal they are about conventional banking the anality will go up by an order of magnitude when it's their 'own' money.

[malevolent]

The most notable refusals for redemptions have been Gemini and Paxos and in both cases it seems it was at least partly to - “maximize their status on CoinMarketCap.”

That's even worse than I thought, it doesn't show them in a good light and proves they're no better than their competitor Tether with its untrustworthiness. OP should include the info.

[mk4]

The most notable refusals for redemptions have been Gemini and Paxos and in both cases it seems it was at least partly to - “maximize their status on CoinMarketCap.”

https://www.coindesk.com/winklevoss-crypto-gemini-gusd-stablecoin-redemption

https://www.ccn.com/paxos-standard-hassling-ethereum-traders-trying-to-redeem-stablecoin-pax-for-dollars/

Would you want your wealth tied up in something worried about how it looks on some piece of shit website?

When you consider how anal they are about conventional banking the anality will go up by an order of magnitude when it's their 'own' money.

Thanks. I knew they were shady, but I didn't know they were THAT bad. Added your message to the main post for more visibility.

[mk4]

Going to bump this. While bitcoin is volatile(as per usual), take note of the risks you're taking when you're holding stablecoins(and NOT real USD).

[libert19]

MakerDao was on verge of shutting down with ethereum's recent flat crash, these stable coins are not 'stable' as we think.

Further reading:

1) https://insights.glassnode.com/what-really-happened-to-makerdao/

2) https://www.coindesk.com/defi-leader-makerdao-weighs-emergency-shutdown-following-eth-price-drop

[figmentofmyass]

MakerDao was on verge of shutting down with ethereum's recent flat crash, these stable coins are not 'stable' as we think.

Further reading:

1) https://insights.glassnode.com/what-really-happened-to-makerdao/

2) https://www.coindesk.com/defi-leader-makerdao-weighs-emergency-shutdown-following-eth-price-drop

It's not surprising since MakerDao trying to be decentralized with help of DAO, which known to have some critical bug in past. But it's not really related to the topic since DAI can't be frozen (unless whole ETH network is stopped/taken over).

bad code, congested network, and unresponsive oracles made the issue worse, but the real problem is DAI's entire model of leveraged ETH-collateralized debt. DAI CDP holders face the same risks that ETH margin traders/lenders do---a flash crash without sufficient bid liquidity = mass defaults. if ETH crashes hard enough, DAI holders are fucked. to save them, MakerDao would have to remove the peg or print MKR tokens and auction them for DAI to cover the shortfall.

it's either not a stablecoin, or it's not decentralized, take your pick. maybe DAI can't be frozen like USDT but it's got its own set of serious problems!

[BayAngelo]

this is really an Eye opener and i learnt this today. we can collectively say that it is not save to Hold stablecoins because your KYC might be required to claim it back. it is also another way of saying that the stablecoin tokens are centralized.
there are questions begging to be answered here. Are users required to perform KYC once or multiple time to claim their coins? what if the company is not satisfied with the KYC of the coin owner.

[squatter]

there are questions begging to be answered here. Are users required to perform KYC once or multiple time to claim their coins? what if the company is not satisfied with the KYC of the coin owner.

The situation with centralized stablecoins is much the same as centralized exchanges. In general, you would only need to perform KYC once. However, we're increasingly seeing instances where both exchanges and stablecoin issuers are freezing accounts and demanding additional due diligence about income and funding sources. If they don't like your answers, they close your account but usually return your money.

I believe this is because exchanges and stablecoin issuers are implementing the type of risk-based AML demanded by FATF rules. As time goes on, I expect cryptocurrency service providers to become increasingly careful about who they do business with, for fear of crossing banking and AML regulators.

[mk4]

MakerDao was on verge of shutting down with ethereum's recent flat crash, these stable coins are not 'stable' as we think.

Further reading:

1) https://insights.glassnode.com/what-really-happened-to-makerdao/

2) https://www.coindesk.com/defi-leader-makerdao-weighs-emergency-shutdown-following-eth-price-drop

Yea it's really unfortunate. Though I was always heavily skeptical of MakerDAO due to it's huge potential to break down when black swan events occur(like what we had recently), I've always found it really really interesting. Unfortunately it's the only "stablecoin" we have right now that's unconfiscatable(correct me if I'm wrong).

[gentlemand]

Yea it's really unfortunate. Though I was always heavily skeptical of MakerDAO due to it's huge potential to break down when black swan events occur(like what we had recently), I've always found it really really interesting. Unfortunately it's the only "stablecoin" we have right now that's unconfiscatable(correct me if I'm wrong).

I am completely unsurprised by what happened there. When it comes to things like this there is one rule - if the potential to screw up badly is in there somewhere it will happen and there will be someone at the right time and place to exploit it. And if random events don't make it happen then someone will force it to happen.

No way do I trust ETH, any programmer or any contract to be dependable enough to run something like that where it actually counts in the real world. It's all too amateurish still. Things like this should remain a research project until it's totally bulletproof and maybe it never will be.

It's good for research purposes that it happened. Things will be learnt. Not good for the people who got boned by it.

[figmentofmyass]

It's good for research purposes that it happened. Things will be learnt. Not good for the people who got boned by it.

it's certainly been a learning experience. i never realized how dangerous DAI was. the underlying CDPs are prone to margin flash crashes. at first i thought "oh well, that's the risk CDP holders took, at least it only affects them". but like any situation where liquidations can't be absorbed by the market, borrowers aren't the only ones who suffer. the flash crash screwed over DAI holders by leaving $4.5 million of unbacked DAI in the system.

and we all thought tether was the only stablecoin that wasn't fully backed.

[mk4]

No way do I trust ETH, any programmer or any contract to be dependable enough to run something like that where it actually counts in the real world. It's all too amateurish still. Things like this should remain a research project until it's totally bulletproof and maybe it never will be.

I totally agree with this. I'm a bit interested in Ethereum, but there's no way I'd invest money in ETH. I'm just watching in the sidelines as of now and I really don't see that changing anytime soon. Seriously, if only the Ethereum people wasn't like immediately concluding that Ethereum is this super wonderful thing that's guaranteed to succeed in the future(and shitting on Bitcoin because apparently everything should be using a blockchain lul), Bitcoin maximalists wouldn't be shitting on it.

[gentlemand]

Giving this a bump.

https://www.theblockcrypto.com/linked/70850/centre-appears-to-have-blacklisted-an-address-holding-usdc-for-the-first-time

100,000 USD (C) frozen.

I wonder what the story is behind this.

As ever these things are nothing more than Paypal with extra paranoia and desperation to yield to The Man. There'll be plenty more of this in future.

Ironically this is likely to fortify Tether's position.

[hatshepsut93]

Giving this a bump.

https://www.theblockcrypto.com/linked/70850/centre-appears-to-have-blacklisted-an-address-holding-usdc-for-the-first-time

100,000 USD (C) frozen.

I wonder what the story is behind this.

As ever these things are nothing more than Paypal with extra paranoia and desperation to yield to The Man. There'll be plenty more of this in future.

Ironically this is likely to fortify Tether's position.

I'd seriously rather use a bank than storing my fiat money in a stablecoin, a bank is less likely to go down, and in the event it does there's even some chance to get some of your money back. Banks can even get bailed out by central banks, but with stablecoins you get all the downsides of centralized custodians, plus some of the downsides of crypto, like managing your private keys, and then there's no of the benefits, like legal protection, deposits, cashback, etc.

[20kevin20]

As ever these things are nothing more than Paypal with extra paranoia and desperation to yield to The Man. There'll be plenty more of this in future.

At least with PayPal you have reliable support, you are quite sure your $1 will still be worth $1 tomorrow and can solve any issue way faster. Have problems with a cryptocurrency? Good luck getting out of your own sh*t fast enough without having to be considered some sort of criminal by the authorities.

Only few days ago did I say over here that stablecoins may be good short-term "safezones" for Bitcoin parabolic changes. I'm now taking back my own words. Better have a 30% overnight paper loss than have 100% of your balance frozen and blacklisted.

[mk4]

Bump! Here it is ladies and gentlemen, as far as I know this is the first. But yea, think. twice. when. holding. stablecoins.

Article: https://www.coindesk.com/circle-confirms-freezing-100k-in-usdc-at-law-enforcements-request

[gentlemand]

But yea, think. twice. when. holding. stablecoins.

It shouldn't be surprising and since it's their toy, being at their mercy should be expected.

The problem is at whose mercy you are. Circle's track record is not one of competence and none of these operations are accountable or approachable. They're also terrified of triggering their legacy masters and you're the one stuck in the middle who'll pay the price for that. You have the odds doubly or triply stacked against you.

At least with a normal bank you have a place to cover in cow shit in protest and identifiable people to blow up. With stuff like this you're nothing but an ignored email.

[ABCbits]

Ironically this is likely to fortify Tether's position.

Until someone did something that attract government attention and Tether will be pressured to do similar action.