Stablecoins and Blacklists

[zasad@]

"Since its inception, Tether has attracted the attention of the U.S. government 19 times" https://cointelegraph.com/



https://www.coindesk.com/business/2024/10/28/tethers-paolo-ardoino-if-the-us-government-wanted-to-kill-us-they-can-press-a-button/
"Tether is doing "the best we can" to crack down on illicit crypto use, CEO Paolo Ardoino told CoinDesk. USDT's role in illicit finance is a "drop in the ocean" compared to the U.S. dollar's, he added.
The company "doesn't expect any political favors by anyone," he said of Howard Lutnick's role in Donald Trump's campaign.
A WSJ report Friday said Tether is under U.S. criminal investigation, which the company denied."

[justdimin]

"Tether is doing "the best we can" to crack down on illicit crypto use, CEO Paolo Ardoino told CoinDesk. USDT's role in illicit finance is a "drop in the ocean" compared to the U.S. dollar's, he added.
The company "doesn't expect any political favors by anyone," he said of Howard Lutnick's role in Donald Trump's campaign.
A WSJ report Friday said Tether is under U.S. criminal investigation, which the company denied."

This alone is good enough to literally not go with USDT if you read what they say. Realizing that they are checked this closely and they are tied to whatever government tells them to do, it is clear that if we put our money into this, then we are taking a risk that we shouldn't be taking and that is why it wouldn't be a smart idea at all.

I believe we are capable of putting our money into many other things, and if you are not really certain about putting it in crypto, just take it out to fiat, you do not have to keep it in tether or any other stablecoin. Fiat itself, is literally better than any stablecoin and this is why you either should be in crypto or be out of crypto, being in stablecoins is like crypto version of fiat, makes no sense to be in there.

[zachamo]

This is the kind of stuff that inspired The Standard (https://www.thestandard.io/). That said, it's rather unclear if the end result will ever align with the original vision partly gold-backed DAO-managed defi stablecoin.

[Abiky]

"Since its inception, Tether has attracted the attention of the U.S. government 19 times" https://cointelegraph.com/


https://www.coindesk.com/business/2024/10/28/tethers-paolo-ardoino-if-the-us-government-wanted-to-kill-us-they-can-press-a-button/
"Tether is doing "the best we can" to crack down on illicit crypto use, CEO Paolo Ardoino told CoinDesk. USDT's role in illicit finance is a "drop in the ocean" compared to the U.S. dollar's, he added.
The company "doesn't expect any political favors by anyone," he said of Howard Lutnick's role in Donald Trump's campaign.
A WSJ report Friday said Tether is under U.S. criminal investigation, which the company denied."

Why is this a surprise to many? It's obvious that a centralized stablecoin will censor or freeze transactions it deems suspicious. They must comply with regulations or else. Using a stablecoin like Tether, would be no different than using a credit card or CBDC (Central Bank Digital Currency). If you want true freedom and censorship-resistance, I'd suggest you get into decentralized stablecoins such as DAI and USDJ. I mean if you're worried about getting blacklisted in the future. Tether only blacklists addresses tied to criminal activity (money laundering, terrorist financing, etc), so if you have nothing to hide and are a law-abiding citizen, you should have no problem using USDT for daily payments. Decentralized stablecoins are for the true paranoid.

Tether has been shady from the start, so seeing the government investigating it is not surprising to me. As long as the company is strictly abiding with US regulations, it should have nothing to worry about. I think USDC is more diligent in this regard than USDT. But that's just my opinion. The question is: Will Tether survive scrutiny from the US government? Only time will tell.

[d5000]

Exactly due to the blacklist problem, I would be interested in stablecoins based on the Bitcoin blockchain. (AFAIK the Omni version of Tether can't be blocked based on a blacklist [1], but anyway is deprecated now).

In the last months a new candidate has emerged, called BAMK. It uses the Runes protocol for the stablecoin. The Runes token is NUSD•NUSD•NUSD•NUSD. (yes, that's the correct name, because Runes currently only supports long names to avoid squatting).

I'm not very much a friend of the Runes system, but a stablecoin would not be a harmful application of the technology. Basically it's very similar to Omni, Counterparty and other previous token protocols on Bitcoin.

The BAMK stablecoin, the NUSD, is backed by USDe (Ethena). But there are unfortunately some characteristics of this project that look like red flags. For example, in the FAQs you can see this:

What prevents the team from running away with the collateral, or issuing unbacked NUSDs?

Technically - nothing. But our own incentives prevents this.

The team has been "doxxed" on "Telegram" according to the website, but there is not really a localizable company behind the project which can be made accountable.

The USDe collateral is held on Ethereum as shown here. There seems to be no technical connection between the reserves and the NUSD on the Bitcoin chain (which would also be quite difficult or impossible to achieve).

Holders of NUSD also earn BAMK rewards for some reason.

So far it unfortunately looks very shady or at least dilettantly built. Makes me actually remember the NuBits project from 2014 a bit ...


[1] I refer here that Tether can't prevent Omni tokens to be transferred, as they are simple Bitcoin transactions with an OP_RETURN data string. Of course what they can do is to refuse to accept USDT from being redeemed if they come from a blacklisted address. This would mean basically that a blacklisted USDT could be worth nothing. However I think it would be impractical to enforce that, because that means every person accepting USDT-Omni must be aware of the blacklist all the time to avoid being scammed with invalid tokens ...

[zasad@]

https://x.com/stable/status/1940048398595547289

Introducing Stable: The First Stablechain Powered by USDT

"Imagine a world where sending money is as simple as texting a friend, where businesses can settle payments instantly without hidden fees, and where developers can build financial tools without limitations. Stablecoins have emerged as a powerful bridge between traditional finance and the digital economy, offering the speed of crypto with the reliability of fiat. But no blockchain has been purpose-built to meet their unique demands—until now. That’s where Stable comes in.
Stable is a dedicated Layer 1 stablechain optimized for payments using USDT. Built to address the inefficiencies of current infrastructure—unpredictable fees, slow settlement times, and overly complex user experiences. At its core, Stable is designed to unlock the true potential of stablecoins, making transactions faster, cheaper, and more reliable for everyone.
Explore our technical documentation to discover how Stable is setting a new standard for stablechains.
Read the full technical documentation here.

The Rise of Stablecoins
With over $150 billion in circulation and 350 million users globally, USDT has emerged as the most widely used digital dollar, surpassing even Visa in transaction volume. Stablecoins have evolved far beyond niche use cases to become a critical pillar of the global digital economy—powering decentralized finance (DeFi), cross-border payments, and international commerce.
However, this rapid adoption has exposed the limitations of existing blockchain infrastructure:
High fees make even small transactions prohibitively expensive.
Slow settlement times disrupt both users and businesses.
Complex tools limit accessibility for everyday users.
Stable addresses these challenges by delivering a scalable, and secure infrastructure optimized for stablecoin transactions."

[zasad@]

Here's a very extensive investigation by renowned expert ZachXBT about how Circle blocks stablecoins.
There are many examples over the past three years.
https://x.com/zachxbt/status/2040055757211885953?s=20

"$420M+ in alleged compliance failures since 2022, including fifteen cases of the US-regulated stablecoin issuer taking minimal action against illicit funds."

https://x.com/zachxbt/status/2040055776203747692
"2/ Circle operates USDC, a centralized stablecoin pegged 1:1 to USD, marketed as a regulated company with a robust compliance program.

"Its token contract includes a freeze/blacklist function, and its terms of service explicitly state it reserves the right to restrict access for suspected illicit actors "in its sole discretion".

The company is incorporated in the US, currently headquartered in New York City, and subject to US federal / state financial regulations."

[eisen33]

Tether freezez over $300m in $USDT on Tron network
https://x.com/BSCNews/status/2047301210605223951

Tether has officially frozen two wallet addresses containing 131,288,800 $USDT & 212,922,653 $USDT on the Tron network.

On-chain data from Whale_Alert confirms the blacklist action, rendering the $344.2M in assets immovable and effectively removing that liquidity from the $TRX ecosystem.

This enforcement move represents one of the largest single-address freezes in recent history and follows an increase in coordinated efforts with international law enforcement. According to Tether's statement, the freeze follows information shared by several U.S. authorities about activity tied to unlawful conduct.

[Abiky]

Tether freezez over $300m in $USDT on Tron network
https://x.com/BSCNews/status/2047301210605223951

Tether has officially frozen two wallet addresses containing 131,288,800 $USDT & 212,922,653 $USDT on the Tron network.

On-chain data from Whale_Alert confirms the blacklist action, rendering the $344.2M in assets immovable and effectively removing that liquidity from the $TRX ecosystem.

This enforcement move represents one of the largest single-address freezes in recent history and follows an increase in coordinated efforts with international law enforcement. According to Tether's statement, the freeze follows information shared by several U.S. authorities about activity tied to unlawful conduct.

Stablecoins are becoming no different than CBDCs with their "blacklists". Tether keeps pleasing the regulators by freezing addresses out of suspicion. Just what banks do today. I think Tether is doing it even more aggressively than Circle (issuer of USDC). Typical of centralized stablecoins. Only truly-decentralized stablecoins give you true freedom and privacy (sort of).

USDS is considered one of the best alternatives available, although there's a dormant "freeze" function built right into the smart contract. With the permission of the Sky DAO, coins can be frozen on the Blockchain. USDS' predecessor (DAI) was definitely the gold standard of decentralized stablecoins. Too bad it's no longer supported. If you're serious about storing your money long-term, I'd suggest you avoid centralized stablecoins in their entirety. They're simply not worth the risk. But to each, their own.

[Emitdama]

Tether freezez over $300m in $USDT on Tron network
https://x.com/BSCNews/status/2047301210605223951

Tether has officially frozen two wallet addresses containing 131,288,800 $USDT & 212,922,653 $USDT on the Tron network.

On-chain data from Whale_Alert confirms the blacklist action, rendering the $344.2M in assets immovable and effectively removing that liquidity from the $TRX ecosystem.

This enforcement move represents one of the largest single-address freezes in recent history and follows an increase in coordinated efforts with international law enforcement. According to Tether's statement, the freeze follows information shared by several U.S. authorities about activity tied to unlawful conduct.

This is literally what decentralization idea is totally against. Yes you are taking a risk that criminals and hackers will use bitcoin too, but in any case, we are willing to take that risk, and hope that people could hold both sides of it and not freeze meanwhile, but freeze afterwards. Meaning that, our money in crypto should not be touched, not even be possible to be touched, but going into crypto or getting out of crypto should be able to, that is where cops should take over.

Otherwise, this whole 300 million being frozen thing, either was just or unjust, doesn't matter, is a bad technology to have for tether to have control over us and we should not use tether exactly for this reason, because it's so heavily centralized.

[zasad@]

https://x.com/SpecterAnalyst/status/2077143591109939248

"Tether has just frozen four TRON wallets holding a total of $131M USDT.

Looking at the source of the funds, most were withdrawn from DTC Pay, a payment service provider, and Bitso, a cryptocurrency exchange.

The reason behind the blacklisting is still unknown.

Stay smart."

https://x.com/SecScottBessent/status/2077162473921319055
"@USTreasury is committed to disrupting and degrading Iran’s illicit financial activities, including its abuse of digital assets.  Today, Treasury’s Office of Foreign Assets Control sanctioned multiple wallets tied to the Central Bank of Iran, resulting in the freeze of over $130 million.

We will continue to aggressively follow the money and deny the Iranian regime access to the proceeds of its illicit revenue schemes."

[Abiky]

https://x.com/SpecterAnalyst/status/2077143591109939248

"Tether has just frozen four TRON wallets holding a total of $131M USDT.

Looking at the source of the funds, most were withdrawn from DTC Pay, a payment service provider, and Bitso, a cryptocurrency exchange.

The reason behind the blacklisting is still unknown.

Stay smart."

https://x.com/SecScottBessent/status/2077162473921319055
"@USTreasury is committed to disrupting and degrading Iran’s illicit financial activities, including its abuse of digital assets.  Today, Treasury’s Office of Foreign Assets Control sanctioned multiple wallets tied to the Central Bank of Iran, resulting in the freeze of over $130 million.

We will continue to aggressively follow the money and deny the Iranian regime access to the proceeds of its illicit revenue schemes."

It's easy enough to impose sanctions when you're the leading force of the global economy. In this case, the USD is the world's reserve currency. Censorship on centralized stablecoins is nothing new. If credit/debit card issuers can freeze or restrict access to your funds, who's to say stablecoin issuers won't do the same? Blacklists are a common feature of centralized stablecoins. Only decentralized stablecoins are the solution. You can already see how the US Treasury was able to enforce sanctions on the USDT stablecoin.

It seems to me that USD-backed stablecoins will act as the "de-facto" "Digital USD". No need for a CBDC. I'd steer clear from stablecoins, unless I want to protect myself against short-term market volatility.

[TastyChillySauce00]

https://x.com/SpecterAnalyst/status/2077143591109939248

"Tether has just frozen four TRON wallets holding a total of $131M USDT.

Looking at the source of the funds, most were withdrawn from DTC Pay, a payment service provider, and Bitso, a cryptocurrency exchange.

The reason behind the blacklisting is still unknown.

Stay smart."

https://x.com/SecScottBessent/status/2077162473921319055
"@USTreasury is committed to disrupting and degrading Iran’s illicit financial activities, including its abuse of digital assets.  Today, Treasury’s Office of Foreign Assets Control sanctioned multiple wallets tied to the Central Bank of Iran, resulting in the freeze of over $130 million.

We will continue to aggressively follow the money and deny the Iranian regime access to the proceeds of its illicit revenue schemes."

Tether blacklisting spree will continue inside the TRON network and I think this yet another act of compliance to U.S. OFAC sanction list. Keeping USDT on the TRON blockchain doesn't seem to be the best idea when amount of blacklisted has reached $4b and counting.
Imagine swapping on their DEX and accidentally linked to the sanctioned USDT.

[suhadi88]

This is literally what decentralization idea is totally against. Yes you are taking a risk that criminals and hackers will use bitcoin too, but in any case, we are willing to take that risk, and hope that people could hold both sides of it and not freeze meanwhile, but freeze afterwards. Meaning that, our money in crypto should not be touched, not even be possible to be touched, but going into crypto or getting out of crypto should be able to, that is where cops should take over.

Otherwise, this whole 300 million being frozen thing, either was just or unjust, doesn't matter, is a bad technology to have for tether to have control over us and we should not use tether exactly for this reason, because it's so heavily centralized.

This makes sense, but they'll also be tough on reports to protect their reputation and avoid fines. This adds to the workload of double-checking for established connections, and it could have consequences if they continue to link the issue to other addresses before the activity is executed.