A centralised company follows the U.S. Department of Treasury and other unsurprising news

A centralised company follows the U.S. Department of Treasury and other unsurprising news
Photo by niu niu / Unsplash

The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned Tornado Cash which is a well known "Mixer" that is used to "mix" cryptocurrencies such as Ethereum. That isn't that surprising of a news considering a North Korean hacking group has used it to launder hundreds of millions or even billions worth of Ethereum. The OFAC then listed a bunch of Ethereum address belonging to Tornado Cash that shouldn't be interacted with. That makes sense although it will be interesting to see how they enforce that.

However people were shocked that Circle, the company behind the $USDC stablecoin, blacklisted the USDC Tornado Cash pool and the USDC in any of the address listed by the OFAC. It was as if people were just learning for the first time that USDC tokens can be blacklisted by Circle.

Start learning about what token you are holding people. It shouldn't take the U.S. government sanctioning Ethereum addresses and a centralised U.S. company following the U.S. government's orders to find out that your tokens can be frozen.

Isn't this supposed to be common knowledge?

Centralised stablecoins such as USDC, USDT, BUSD can be frozen. Supposed decentralized stablecoin DAI is backed 70% by USDC as can be seen from https://daistats.com/#/.

Wouldn't surprise me if the OFAC or any other organisation decides to sanction DAI and Circle has no choice but to blacklist the USDC that is used as collateral to mint DAI thereby causing the total collapse of DAI. Most hackers use DAI as their stablecoin of choice when swapping hacked funds as USDT and USDC can be frozen immediately after a hack and hackers/exploiters are frequently reminded on-chain by their accomplices and beggers that they should immediately swap their USDC/USDT or any other centralised coins for DAI or ETH to avoid getting blacklisted.

Although a very very small amount of DAI is used in Tornado Cash, the OFAC isn't going to care and might even use that as an excuse to cause the downfall of DAI. If that does happen someday, one way to profit from that is to borrow DAI against other stablecoins like USDC/USDT or to short the MKR token when the news of DAI being sanctioned is announced. That would certainly be a sad day for Decentralisation but that's what happens when 70% of your collateral is dependent on Centralised USDC.

Another token that could be easily affected is WBTC which is wrapped Bitcoin that is used in a lot of chains. Not many people know that WBTC which has $5,600,000,000 worth of Bitcoin wrapped is centralised and assets can be frozen at any time.

A decentralised alternative is renBTC which is completely decentralised with no backdoors but it is obviously a lot less liquid with a $83 million market cap.

Anyways, can't wait for everyone to get shocked when the U.S governement proceeds to destory DAI, WBTC and other centralised tokens that due to their nature of being technologies are used by both good and bad people albeit for very different reasons.

In times like this you can either choose to hold a stablecoin or hold just ETH or BTC. You could also go short that token on a DEX or CEX of your choosing.