Circle freezes over 75,000 USDC worth of money linked to Tornado Cash addresses blacklisted by the US Treasury, raising concern over a lack of Stablecoin censorship resistance.
Early this week, the US Treasury department meted sanctions on Tornado Cash and addresses linked with the decentralized mixing platform. Following that, Crypto aggregator Dune Analytics revealed that Circle, the issuer of the USDC stablecoin, froze over 75,000 USDC in funds linked to the sanctioned Tornado Cash addresses. The move has caused concern within the crypto community about a lack of Stablecoin censorship resistance among privacy advocates.
Concern Grows Over Stablecoin Censorship
The move by Circle has stirred up concern and fears within the crypto community over censorship resistance. Shapeshift’s CEO, Erik Voorhees, advised the MakerDAO community to exercise caution after the U.S. Treasury imposed sanctions on Tornado Cash. he implored them to withdraw their USDC collateral and convert them into another stablecoin. However, he did not go so far as to suggest a more censorship-resistant option.
The situation also saw the embattled founder of TerraForm Lab break his three weeks Twitter silence. Do Kwon, facing a class action suit for allegedly selling unregistered securities, reiterated his belief that the crypto industry needs decentralised money.
Do Kwon’s attempts to create decentralized currency with the UST failed, leading many to believe he scammed investors. The UST was designed to bridge the decentralized money gap by being backed by Bitcoin reserves. However, its de-peg caused LUNA and UST holdings held by investors to become worthless overnight. This has resulted in Do Kwon and his company facing investigation in South Korea and the US.
Following Do Kwon’s tweet, several crypto enthusiasts did not take too kindly to him, going as far as calling him a criminal. However, some others shared his sentiment, believing that the UST would have been a much-needed solution with a better design.
Consequently, a researcher at Proximity, a NEAR Protocol DeFi platform named @resdegen suggested creating a new, decentralized stablecoin. One that is not subject to governmental regulations. In his view, Liquidity’s LUSD and Reflexer’s Rai are completely decentralized. However, both are collateralised, thereby limiting their scalability. Therefore, Resdegen proposed creating a brand-new project that would be algorithmically pegged to derivatives contracts for ETH or BTC.
Questions Arise Over Sanctions
While the debate over the need for a more decentralised and censorship-resistant stablecoin continues, questions over the US Treasury sanctions have come up. The Founder of Bankless, Ryan Adams, referred to the U.S. Treasury’s moves as “the opening shot of big brother’s attack on crypto.” He further questioned which protocol would be next, insinuating that the entire industry was vulnerable.
Furthermore, other enthusiasts criticised the sanctions, contending that they mainly target US users while allowing actual criminals to continue using the mixer to launder money. One Twitter made this claim calling the sanctions a political maneuver formulated behind closed doors to impact the individual freedom of Americans.
The US Treasury sanctions on Tornado cash follow claims that over $7 billion had been laundered using the protocol. As a result, Americans and US Based entities are prohibited from interacting with the platform or addresses linked with it. Failure to comply might result in penalties ranging from $50,000 to $10,000,000 in addition to 10 to 30 years in prison.
Do you think the sanctions meted out on Tornado Cash is an attack on law-abiding Americans who use the platform for privacy concerns? Let us know your thought in the comments below.
Chris is a crypto enthusiast and a firm believer in the blockchain’s ability to create a new financial paradigm. Through writing, Chris hopes to expose the intricacies of this disruptive technology and how it is beneficial to Africans and developing countries. He aims to give readers a rational and unbiased outlook of the industry by equipping them with the necessary information to make enlightened investment decisions.
