Victor Ugochukwu · Dec 14, 2020 . 5min read
Circle blacklists USDC address to comply with law enforcement
Circle confirms the blacklists of an address containing USDC stablecoin worth $100,000 to comply with the law enforcement
By Rakesh Kapoor · Jul 9, 2020 . 6min read
In an interesting turn of events, the cryptocurrency’s decentralized community felt a shock as Circle blacklisted a USDC address with a balance of about $100,000.
Although the risks of using a centralized stablecoin were known, this news came as shock to the users. With Bitcoin, decentralization took flight, so did
privacy, to a certain extent, especially with the introduction of privacy coins inspired by bitcoin’s success.
Circle, Centre, and Centralization
The address blacklisted by Circle was due to an on-going investigation. As reported to the Block, Circle stated,
“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.”
The blacklisting aspect was not addressed during the launch of USDC, however, Circle’s page clearly mentioned that it can blacklist wallet addresses which are maintained by the USDC smart contract. Additionally, Circle did mention that the reason for blacklist could be them complying “with legal requirements such as a court order or global sanctions restriction”.
Although it was not clear who owned the address, the crypto community reacted differently to the blacklist. While some sided with Circle and Centre stating that blacklist was “inevitable” and that Circle never “claimed to be a decentralized stablecoin”, others not so much.
Popular Bitcoin enthusiast reminded his followers that stablecoins were “checking accounts”.
While blacklisting in and of itself isn’t disconcerting, the fact that USDC has its roots deep into DeFi is. USDC is used on all of the major platforms of DeFi like Compound, Aave, MakerDAO, etc.
At the time of writing, USDC had a total market cap of $1.05 billion and has a gargantuan share of 12.50% in the stablecoin industry, while USDT still makes up about 80% of all the stablecoins. What’s interesting is that USDC’s share of the stablecoin market rises up to 60% if USDT is not considered.
With USDC’s development, the need for decentralized stablecoins will garner attention. As of now, the best-known decentralized stablecoin is Dai, which is a crypto-backed stablecoin soft-pegged to USD and built on the Ethereum blockchain. Additionally, Dai is governed by the MakerDAO system.
DeFi, rightfully relies on Dai, which is one of the most decentralized stablecoin, however, the problem with these is the volatile peg. Unlike centralized stablecoins like USDT or USDC, Dai and other decentralized stablecoins suffer from volatile pegs.
In conclusion, decentralized stablecoins still have a lot of kinks that need to be worked on, while this is in the works, centralized stablecoins will enjoy the unmatched control over the stablecoin industry,