Circle is halting USDC transactions involving Tornado Cash decentralized applications, a move that many see as a clear threat to centralization.
Earlier this week, the United States Treasury Department added more than 40 cryptocurrency addresses allegedly associated with controversial mixer Tornado Cash to the Office of Foreign Asset Control, or OFAC, on its list of specially designated citizens.
Following this latest development, Circle, the issuer of the USDC stablecoin, reportedly froze funds worth more than 75,000 USDC linked to 44 Tornado Cash addresses approved by OFAC.
Marius Ciubotariu, co-founder of Hubble Protocol, commented that Circle’s move shows the danger of centralization. Ciubotariu said;
“Circle’s decision to comply with the US Treasury and ban Tornado users from buying or selling USDC tokens is an extremely worrying development that threatens the integrity of the cryptocurrency, and decentralized finance in particular.
This decision has resulted in the blocking of assets worth an estimated $437 million, which will certainly affect all kinds of users of the cryptocurrency mixing service. More importantly, however, it underscores how dangerous it is for a centralized company to manage more than $54 billion in assets in crypto.”
Ciubotariu pointed out that the example this could set for the future of Ethereum virtual machine (EVM) smart contracts is also dangerous. In the future, it may be possible to see these contracts written with an opt-in clause that would allow node validators to decide not to process transactions due to a black/watchlist.
Circle’s move is a wake-up call for the crypto industry
Laguna CEO Stephen Rust explained that Circle’s action is a wake-up call for the cryptocurrency industry as it shows the danger of centralization. Jung said;
“Circle’s move to ban users of the Tornado cryptocurrency mixing service from trading USDC has set an extremely dangerous precedent and should be a wake-up call to everyone working in the cryptocurrency industry. While the North Korean state-backed hacking group With much being said about Tornado’s link with Lazarus, it is likely that North Korean users make up anything more than a tiny fraction of one percent of Tornado’s users.
Rust said that the ability to blacklist can (and has) written in Ethereum Virtual Machine (EVM) token contracts is a major vulnerability and coercion point for the industry.
He added that people had been warned about the consequences of adding this feature to USDC contracts from day one. Jung said that;
“We now have a centralized company at the mercy of US regulation that is running the fourth largest cryptocurrency in the world – and with a market cap of over $55 billion on the line. This is a really intimidating move. Imagine a business like that. Where your nearest competitor can lock you down by adding a row to the database that it has complete control over?
Lugana’s CEO said that while the US Treasury claims his move is helping to launder $7 billion in funds allegedly derived from cybercrimes due to Tornado Cash, there is no doubt that innocent users were caught in it. who have used Tornado for completely legitimate privacy reasons.
Some of the largest stablecoins, including Tether (USDT), USDC and BUSD, are issued by centralized entities.