Stop holding USDT stablecoins

[dkbit98]

I am sure most of you know already that USDT tether and most stablecoins can be frozen for any reason, but you don't know the stats.

Recently I found interesting website blocksec that is tracking frozen USDT tokens, and numbers can be only bigger when we include other networks and chains.
So far Tether company has blacklisted 8432 addresses and frozen tokens worth $4.40 Billion on different chains, and that numbers are only since tracking started!
First recorded date of frozen tokens is 28 November 2017, and you can find more information on blocksec website:
https://blocksec.ai/usdt-freeze

My question is what happens once all those tokens are frozen?
Some of them got unfrozen, but amount is much smaller, only in 591 addresses worth $540.79 Million.
Other tokens get destroyed, in 1,966 addresses worth $1.24 Billion in different chains.
Rest is unknown.

Don't hold any stablecoins unless you are willing to accept this risk.
Bitcoin can't be frozen.

[TryNinja]

USDT (tether)
USDC (circle)
PYUSD (paypal)

All of them can be frozen, it's in the smart contract.

I guess we should use DAI (rebranded to USDS) if we want a stablecoin.

Bitcoin is the way, but sometimes we can't afford a fluctuating rate. Stablecoins still have a reason to exist.

[OmegaStarScream]

-snip-

I would imagine the frozen stablecoins would eventually get seized by law enforcement. They probably got frozen upon request too.

-snip-
I guess we should use DAI (rebranded to USDS) if we want a stablecoin.

https://info.sky.money/supply

DAI used to be backed by USDC (at least some of it) so If it's backed by something that can be frozen... it's probably not the greatest option either.

[dkbit98]

USDT (tether)
USDC (circle)
PYUSD (paypal)

All of them can be frozen, it's in the smart contract.

This is correct, but I don't know any tracking stats for USDC, PYUSD and other tokens.
Pleas note that anything on Binance crap chain cane be frozen, even native BNB coin and all assets on that chain.
I wrote few months ago that 16 blockchains have freezing ability, and 19 blockchains have potential for that.

Source article:
https://www.bybit.com/press/post/bybit-s-lazarus-security-lab-reveals-hidden-fund-freezing-functions-across-16-major-blockchains-blt3ce15bb5dcfaef51

https://info.sky.money/supply

DAI used to be backed by USDC (at least some of it) so If it's backed by something that can be frozen... it's probably not the greatest option either.

Good catch.
I was saying the same thing, but almost nobody listens 

[TryNinja]

https://info.sky.money/supply

DAI used to be backed by USDC (at least some of it) so If it's backed by something that can be frozen... it's probably not the greatest option either.

There is a risk, but it's only 57% and Circle can either freeze all of their USDC reserves or none at all, so it's a bit of a let it slide situation because imagine freezing $5b of assets just to partially hit someone's $10m?

What are the other options? No real backing and you get TerraLUNA UST all again.

[noorman0]

-snip-
My question is what happens once all those tokens are frozen?

I think "unfreeze" or "destroyed" are actions after freezing (through authority approval process). "destroyed" will result in new issuance? however, their 1:1 physical asset reserve claim must be maintained.

[BitMaxz]

I don't know if I, as a customer who holds USDT on all different exchanges, can be affected once my exchange deposit address gets frozen?
I hold most of my USDT on 3 different exchanges. Well, I don't actually hold them but use them for trading futures.

What do you think?
I think I'm not going to be affected, I guess, since I am holding it on the exchange?

[dkbit98]

What are the other options? No real backing and you get TerraLUNA UST all again.

Not holding any stablecoins is always an option
We can argue that fiat currencies in bank accounts can also be frozen, but that is impossible for cash in your hands.

What do you think?
I think I'm not going to be affected, I guess, since I am holding it on the exchange?

It doesn't matter how many addresses you have, they can freeze anything if they want, and excuse can always be some connection in past, ''dirty'' coins, etc.

[TryNinja]

What are the other options? No real backing and you get TerraLUNA UST all again.

Not holding any stablecoins is always an option
We can argue that fiat currencies in bank accounts can also be frozen, but that is impossible for cash in your hands.

Right, so if I need a fixed rate of 1:1 USD... I do what?

Bitcoin is the way, but sometimes we can't afford a fluctuating rate. Stablecoins still have a reason to exist.

Different needs for different people.

The way to go is finding a middle term or the "least bad" solution, not exactly this. Warning is ok, though.

[rat03gopoh]

What do you think?
I think I'm not going to be affected, I guess, since I am holding it on the exchange?

That's the best solution; centralized coins should be treated centrally. Store them in a regulated environment, and always transact off-chain. I only think the freeze will occur on exchanges if you don't acquire them through the exchange itself, or if the original coin was already flagged before being exchanged.

Don't take those stablecoins into "the wild". The inherent risk is more threatening than the additional risk.

[Rikafip]

Don't hold any stablecoins unless you are willing to accept this risk.

That's the crucial part I think when using stablecoins, to know that they can be frozen at any time, but I can bet that an average user has no idea that's even possible.

With that being said, I do use stablecoins, but I am trying not to hold for longer period of time, in order to minimze the risk.

[Charles-Tim]

@dkbit98
Cash is not practical with a discussion like this. We can not have all our fiat in cash.

What are the other options? No real backing and you get TerraLUNA UST all again.

Not holding any stablecoins is always an option
We can argue that fiat currencies in bank accounts can also be frozen, but that is impossible for cash in your hands.

Right, so if I need a fixed rate of 1:1 USD... I do what?

It was said that DAI can not be frozen according to what has been discussed before on this forum regarding topics like this. But it is worth knowing that when USDC fell out of peg, DAI also fell out of peg.

But what I am very surprised about is that people always do the opposite
They prefer centralized exchanges, they prefer stable coins like USDT and USDC that can be frozen, they prefer P2P on exchanges while there are alternatives but most of them are not going for the alternatives which is the privacy way.

[Alpha Marine]

Not holding any stablecoins is always an option
We can argue that fiat currencies in bank accounts can also be frozen, but that is impossible for cash in your hands.

For me, I need an alternative. I hold stable coin always, not long term though, but I usually convert my fiat to stable coins. My local currency is shit. Its so unstable and can depreciate at anytime, so keeping savings I would like to use in 4-6 months in my local currency is not ideal. At the same time, since I want to use the money in a short time, keeping it in Bitcoin is not also idea. With this stable coins are my best option. I know it's centralised and I know it's not ideal, but what are my options? This is why I need an option.
I cant hold huge amount of cash in my hand, but even if I coud, inflation will still affect it if the currency decides to depreciate again. Even at that, I simply can't hold most of my money in cash, it doesn't make sense. So I need an alternative.

[FinneysTrueVision]

I don't know if I, as a customer who holds USDT on all different exchanges, can be affected once my exchange deposit address gets frozen?
I hold most of my USDT on 3 different exchanges. Well, I don't actually hold them but use them for trading futures.

What do you think?
I think I'm not going to be affected, I guess, since I am holding it on the exchange?

If your deposit address is blacklisted, it would be because Tether believes the source of funds is from illegal activity. Your account is going to be flagged when they do a check with their chain analysis provider and it is likely that the exchange could be contacted by law enforcement.

Tether can blacklist an address for any trivial reason, but it is usually done when you have done something very suspicious. If someone is in a position where they have an above normal probability of having their stablecoins frozen, it would not be a wise move to use centralized exchanges, or centralized stablecoins for that matter.

[_act_]

If your deposit address is blacklisted, it would be because Tether believes the source of funds is from illegal activity. Your account is going to be flagged when they do a check with their chain analysis provider and it is likely that the exchange could be contacted by law enforcement.

The three reasons Tether freeze USDT is because of law enforcement, regulatory bodies and those in connection to security incidents like exchange hack.

The freeze is done for the government to think that they are following the law so that they can have high adoption rate.

But individuals can not report scam to them. That is the reason you will see people scamming people obviously and they will have high amount of USDT that are not freezed.

The freezing of a thing will only deceive people. If you get scammed, you will be seeing the USDT on the blockchain but Tether will do nothing.

[Stalker22]

Don't hold any stablecoins unless you are willing to accept this risk.

That's the crucial part I think when using stablecoins, to know that they can be frozen at any time, but I can bet that an average user has no idea that's even possible.

Yeah. And, there is another concern for the newcomers and inexperienced people that scammers will attempt to sell some of the frozen tokens stored in hardware or software wallets as "discount" wallets and tell you all you need is a special key to unlock your funds!  Many people still dont understand that just because they see a balance on a blockchain explorer doesnt mean they will have access to the funds.