Tether is now able to freeze and destroy your USDT issued on the Ethereum and TRON blockchains after the company recently reversed a $1 million transaction which failed to reach the Swerve DeFi platform as we reported in the Tether coin news.
New information was revealed about Tether’s ability to reverse the USDT transactions according to reports by the Block. The user of the DeFi platform Swerve sent $1 million worth of USDT to the application and the lost access to that money. The news eventually reached Tether CTO Paolo Ardoino who offered to recover the USDT transactions for the user.
To recover the funds, Tether reached out to the user and confirmed that the tokens were lost and the company used a function in Tether’s smart contracts in order to blacklist the ETH addresses that the tokens were directed to. This didn’t affect Swerve but it did however affect whether Tether’s tokens reach their destination.
Furthermore, Tether’s capabilities don’t allow it to move USDT between the addresses as Tether can now freeze and destroy coins as well as issue and send them thus allowing to adjust the supply of the overall token. These capabilities apply to USDT tokens on the ETH and TRON blockchains not those on the other blockchains. According to Ardoino, this is not the only time where an incident with Tether recovering funds happened. It helped 12 users recover funds last week and now recovered $5 million of USDT this year alone.
The Block suggested that Tether is quite unique and that other coins such as Gemini and USDC don’t have the ability to control the transactions. However, as we reported, the Centre froze $100,000 worth of USDC back in July while reports date back to 2018 suggest that Paxos and Gemini also had backdoors that allow each company to freeze transactions. This ability to freeze tokens is a key feature of the TrueUSD.
Most of the token-freezing opportunities are not meant to be used in response to the user’s demands as they are meant to comply with law enforcement requests. Unlike the rest of the cryptocurrencies, stablecoins are backed by the bank reserves and are operated by companies which means that there’s full legal compliance needed. Reversible transactions will be considered a sign that Tether is centralized. The company already attracted criticism for inadequate audits and tendencies to mint tokens without proof of reserve. The ability of the company to control the transactions could result in even more controversies.
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