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Comment by cwkoss | Hacker News Reader

Interesting. Do you know the mechanics of how funds get locked? Are they prevented from being transferred on-chain or only from being removed at the USD-USDT edges?

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the smart contract has a blacklist flag that can be activated by the Tether, this prevents on-chain transfers. https://etherscan.io/token/0xdac17f958d2ee523a2206206994597c...

The USDT will be burned and the USD released to the rightful owner after law/legal approval -- https://twitter.com/paoloardoino/status/1425188386034311168

Wait, so they have the ability to arbitrarily blacklist people from transferring tethers? At this point, is Tether anything other than a weird bank?

Yes, Tether is nothing more than a weird bank. USDT is backed by real currency (or atleast Tether claims so). And is equivalent of the treasury giving you a bill and promising to pay you, just on a pollution causing blockchain

But see how nice having a blacklist is (which you seem to say is the core business of banks, when in fact it is to provide massive amount of capital as loans at a cost or create yield-producing aggregated products - which can work with any currency, crypto or not, and which Tether barely fits the definition of).

I d propose every chain to have a blacklist mechanism, temporary if you want, with a voting mechanism to remove innocents. You cant facebook your way ("we re just a platform") out of financial rules or you ll just end up rewarding thieves while benefitting innocents very little.

To be fair, they never claimed to be anything else, just a conduit to allow seamless transfers of usd value on the blockchain, while they hold the actual funds (applies to all non-algorithmic stables).

It is more like a regular bank than anything else. A bank that uses a different transport network.

That's why decentralized stable coins like DAI and others exist :)

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