Can ERC-20 based stablecoins be confiscated or blacklisted? Can I lose my stablecoins? What are differences between stablecoins out there?

  • "confiscated or blacklisted" - this terminology is outside the scope of this website IMO. Moreover, these terms are subjected to the specific legal system in the specific country that considers itself in charge of your assets (i.e., entitled to tax them). For every individual, there are typically two such countries - the country of residency and the USA (except for USA citizens of course, for which there is one such country). In any case, your question, as well as your own answer below, are both subjected to legal interpretation, hence are not well defined IMO. – goodvibration Jul 9 at 8:31
  • In short, the SEC evil empire can do whatever it wants to the assets of any individual on the planet at any given moment (and it can also choose to change its mind at a later point in time). So any answer to a question around that issue is simply inconclusive. – goodvibration Jul 9 at 8:35

Technically ERC-20 standard itself cares about transfers and transfers only. It does not care what happens outside transfers and this activity might including thing like minting, but also things like freezing, blacklisting or reclaiming tokens.

The censorship resistance of a particular token has more dealing with the issuance of the asset the token presents. Then this derives the characteristics of a smart contract. Generally, stablecoins can be divided into two categories.

US dollar bank account backed currencies are subject to the US law. Thus, they must have a way to have legal enforcing. In the case of USDC a court order was served to the Centri, the company managing the reserves of USDC stablecoin. Centri needs to follow the court ruling, or they cannot keep existing as an American company.

On the other end of a spectrum, we have MakerDAO DAI that was backed purely by censorship-resistant cryptocurrencies (USDC was included in the collateral pool causing this principle to break). If the collateral for a stablecoin lives on a blockchain and is censorship-free, it is harder to have a court oversight to stop something in this kind of an ecosystem, though not impossible as the court could always go after well-known DAI or collateral holders.

Here is my article about the recent USDC freeze that also discuss freeze and blacklisting implications for smart contracts, lending pools and such.

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