Centralized stablecoins blacklisted raise security concerns in the DeFi ecosystem.

Recently, a stablecoin issuer blacklisted a certain Address, which has attracted widespread attention in the crypto assets community, particularly in the thriving Decentralized Finance industry. This incident reveals the potential impact that centralized stablecoins may have on the decentralized finance ecosystem.

In March of this year, the COVID-19 pandemic caused a significant decline in the crypto assets market, and the decentralized stablecoin DAI was also affected. To address this situation, the MakerDAO community decided to introduce a stablecoin pegged to the US dollar as collateral. However, unexpectedly, the issuer of this stablecoin recently blacklisted an address holding approximately $100,000 and froze the funds in that address at the request of law enforcement.

According to the issuer's statement, they have the right to confirm whether certain addresses are blacklisted based on court orders from jurisdictions with appropriate authority. However, they stated that they cannot disclose specific details. It is worth noting that once an address is blacklisted, it will not be able to receive or transfer that stablecoin.

This event has raised questions about the true level of decentralization of DAI. The CEO of a lending protocol pointed out that if stablecoins are locked in the Maker Vault, the issuer's use of the blacklist function could affect DAI's peg to the US dollar.

Industry insiders believe that although DAI can withstand financial risks, if its collateral can be blacklisted, it may affect the underlying structure of DeFi protocols.

Although crypto companies operate in a relatively lenient environment, they still need to comply with the law. A legal advisor from a well-known project stated on social media that this blacklist mechanism poses substantial risks to the Decentralized Finance industry.

It is worth mentioning that this is not the first time a similar situation has occurred in the crypto industry. Another major stablecoin issuer has blacklisted 39 Ethereum Addresses since November 2017, involving amounts totaling millions of dollars.

The practice of these centralized companies choosing to cooperate with law enforcement and unilaterally blocking related transactions contradicts the decentralization principles advocated by crypto assets proponents. However, according to their policy documents, failing to take these measures could pose a threat to the network, and therefore they must comply with relevant legal orders.

The technical director of a well-known project believes that a small amount of frozen transactions may not affect the market position of stablecoins, but if this practice becomes the norm, it may set a bad precedent. He is concerned that if stablecoins with "backdoors" are widely adopted, regulators may gain more power.

A representative of a DeFi venture capital fund pointed out that there are still centralization issues in the DeFi industry, which is also the reason why he does not invest in certain projects. He explained that if the issuer of a stablecoin is a centralized entity, it could arbitrarily block transactions or freeze assets.

Finally, experts concluded that this event highlights the ongoing global demand for Bitcoin. Although Bitcoin remains insufficiently stable and is not an ideal savings tool, if one has to choose an indivisible and unstoppable value transfer tool, Bitcoin is still the preferred option. Of course, this is provided that trading is not conducted on centralized exchanges.