Coinbase’s New Stablecoin User Agreement Allows for the Freezing and Reporting of Accounts

Recently, Coinbase and Circle announced the creation of the USD Coin (USDC), a stablecoin to compete against Tether’s 1:1 USD pegged USDT. The partnership between Coinbase and Circle developed an Ethereum ERC-20 cryptocurrency, called the “CENTRE Consortium.” The purpose of the venture is to allow users to transfer and utilized the USDC token as the USD fiat currency, with the ease and fees associated with cryptocurrency.

USDC can be used to move easily between crypto exchanges, as well as store and transfer the token to other people through the Coinbase Wallet. As the stablecoin is an ERC-20 token, it can be utilized on Ethereum well.

The new stablecoin will allow for easier of adoption of cryptocurrency by those new to the industry, however there are some mechanics behind the token that users should be made of aware. Circle maintains autonomy over the accounts on the platform. According to the user agreement, there are terms that go against the very nature of cryptocurrency and the goal for a decentralized financial system. While the purpose of cryptocurrency was to give power over their money back to the user, Circle’s policy with USDC states that they can freeze funds and terminate accounts, temporarily or even permanently, as well as report accounts to the authorities. The company states in the user agreement that if users transfers digital assets to a “blacklisted” address, then it constitutes a violation of the their terms.

The user agreements reads:

“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.”

The stablecoin still garnered a lot of interest, in that is backed by Goldman Sachs, receiving $140 million in investment.