Coinbase’s New Stablecoin (USDC) Could Freeze Funds and Censor Accounts

As previously reported by CryptoGlobe, Coinbase and Circle have recently created USD Coin (USDC). This token, an Ethereum ERC-20 cryptocurrency, is a product of Coinbase’s joint venture with Circle, titled the “CENTRE Consortium.” This partnership aims to “[establish] a standard for fiat on the internet and [provide] a governance framework and network for the global, mainstream adoption of fiat stablecoins.”

The newly launched stablecoin, USDC, will allow users to move U.S. Dollars as easily as they can move cryptocurrencies. This means traders can easily transfer liquidity between exchanges, and thanks to support from the Coinbase Wallet, they can now store it themselves and transfer it to other people as well. Since USDC is an ERC-20 token, it can also be stored on Ethereum wallets, such as the Ledger Nano S.

Even though this newly launched project could allow more people to use cryptocurrencies, it could also prevent some from using it. In their user agreement, Circle explains that they have near complete control over user accounts. They can freeze funds, terminate accounts, and even report accounts to the authorities. Circle’s user agreement outlines their blacklisting policy:

Circle reserves the right to “blacklist” certain USDC addresses and freeze associated USDC (temporarily or permanently) that it determines, in its sole discretion, are associated with illegal activity or activity that otherwise violates the terms of this User Agreement (“Blacklisted Addresses”). In the event that you send USDC to a Blacklisted Address, or receive USDC from a Blacklisted Address, Circle may freeze such USDC and take steps to terminate your USDC Account. In certain circumstances, Circle may deem it necessary to report such suspected illegal activity to applicable law enforcement agencies and you may forfeit any rights associated with your USDC, including the ability to redeem USDC for U.S. Dollars. Circle may also be forced to freeze USDC and/or surrender associated U.S. Dollars held in Segregated Accounts in the event it receives a legal order from a valid government authority requiring it to do so.

Despite these possible issues, Coinbase seems extremely positive on stablecoins. Chief technology officer (CTO) Balaji Srinivasan was recently quoted comparing stablecoins to the iPhone:

[they] could be to the financial system what the iPhone was to mobile, namely an innovation that makes the entire system more programmable, and hence more useful.

The launch of this new stablecoin shows the growth of legacy interest in the cryptocurrency space. Circle, the creator of USDC, has recieved $140 million in venture capital funding with lead investmnet from Goldman Sachs. Circle also owns the cryptocurrency exchange Poloniex.