Over 400 million or one out of every 80 USDT on Ethereum is seized. What happens next?
TLDR: Tether and Circle can freeze $USDC and $USDT on any wallet, there’s over 400M $USDT banned on the Ethereum blockchain alone.
What is in Tether’s power when it comes to USDT? In short, almost anything. Through a multisig controlled by the following 6 addresses, they can decide the fate of any USDT on the Ethereum blockchain.
- 0xf4b51b14b9ee30dc37ec970b50a486f37686e2a8,
- 0xee5207d3c88562fc814496af0845b34cfd4afc8c,
- 0x61d5a4d5bd270e59e9320243e574288e2a199fed,
- 0x25bb61643e4881147e6aabb65e6dd45cf2904155,
- 0x4096a34e582664f969753b34da6e72d55b3c85c1,
- 0x4d915dd2c56814bd3db51a1da35b302bcc9c8973
Tether has the ability to issue, freeze, destroy, and send tokens. The wallets holding these frozen USDT are banned from moving funds. Tether also has the ability to unfreeze USDT and they also have been doing it in the past.
From 2018 to late 2021, 200 million USDT were targeted by Tether and consequently banned, this amount doubled in 2022 to reach 400.9 million USDT linked to 646 wallets.
The company has been doing so for multiple reasons such as hacks (PolyNetwork exploit, KuCoin Exploit, Yearn DAI Exploit, etc.) while in other cases it was done either because of regulatory pressure or as a precautionary measure as the following tweet proves.
This arbitrary power that Tether holds been questioned multiple times by different actors of the industry especially since it showcases a centralized failure point in the face of regulators whose interests may not align with the people they represent.
With regulators everywhere in the world targeting major stablecoins, Tether as a company has an incentive to align with them. What stops regulators from banning users who do not adhere to KYC practices or retail users living under tyrannic regimes ?
Europe is also currently looking into harsh regulations for crypto, what would stop them from banning interactions with smart contracts that do not align with their interests ?
Will Tether enforce a ban on users based on European regulations, American regulations or the user’s local regulations ?
These are all questions that we need to ponder upon as actors of this permissionless and decentralized breakthrough technology that is blockchain.
Moreover, with the coming Ethereum merge, there were also talks about how centralized stablecoins issuers are the ones that are in control of the transition to ETH Proof of Stake also known as ETH2.
Centralized stablecoins make up a huge portion of decentralized finance. Thus, their issuers are actually in full control of the ETH2 upgrade as in the case of a fork, they decide on which chain (ETH1 or ETH2) they honour redemptions.
Centralized stablecoins lead to a failure point in crypto. It is the reliance on a central entity for the safety of your funds.
Stable Unit solves this, USDPro is the easiest DeFi onboarding experience. You simply buythe stablecoin and the yields directly comes to your wallet.
Tell us what you think about centralized stablecoins and the control they wield over crypto users and blockchains in the replies to this blog post !
📚 Additional useful resources
- Unbanned USDT : https://dune.com/sineborod/UDST-unbanned
- USDT vs USDC banned comparison dashboard : https://dune.com/shogun/usdtusdc-blacklisted-detailed
- OpenSea banned Iranian artists because of US sanctions : https://nftnow.com/features/opensea-banned-all-iranian-artists-we-need-to-talk/
- Tether’s multisig wallet : https://etherscan.io/address/0xc6cde7c39eb2f0f0095f41570af89efc2c1ea828#readContract
- Curve Finance discussing the control centralized stablecoins have on the Ethereum upgrade: https://twitter.com/CurveFinance/status/1555237094385147905
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