The CENTRE consortium formed by Circle and Coinbase has blacklisted an Ethereum address holding $100k worth of USDC stablecoin.
The transaction on Etherscan shows that CENTRE called a “blacklist(address investor)” function on June 16, 2020, to freeze all coins essentially. CENTRE that issues the US Dollar pegged USDC on Ethereum blockchain confirmed this:
“Centre can confirm it blacklisted an address in response to a request from law enforcement. While we cannot comment on the specifics of law enforcement requests, Centre complies with binding court orders that have appropriate jurisdiction over the organization.”
As per USDC’s policy, the blacklisted addresses can no longer receive any USDC, and all of the funds are blocked and can’t be transferred. All the USDC on blacklisted addresses may also be “wholly and permanently unrecoverable.”
Recently, USDC reached a market cap of a billion-dollar, within less than two years of its creation.
In 2019, the growth was led by the explosion of the decentralized finance (DeFi) ecosystem, and in 2020, the financial crisis caused by COVID-19 increased the demand for digital dollars that are fast, global, secure, and inexpensive, and businesses seeking a new and digital form of payment that enables low-cost transfers anywhere nearby instantly stated Circle.
Now the fact that USDC, which recently crossed the 1 billion circulating supply, runs on a public blockchain has the power to control which transactions get a green light just like in centralized and traditional structure, it puts a question mark on its decentralization. The first time it has happened, and nothing prevents it from doing it again.
“This is important: USDC blacklisting has gone from a hypothetical concern to a real risk. CENTRE should now explain in detail what criteria it uses in deciding when to blacklist an address. Was this compelled by court order or done voluntarily? Is there a process for appeal? Etc,” said Jake Chervinky, General counsel at Compound Finance.
According to CENTRE’s policy, it can blacklist addresses under two circumstances: if there is a potential security breach or there is a threat to the network. Also, it considers blacklisting to comply with the laws and regulations.