Maker Enrages DeFi Community with Stablecoin Change

Maker, which recently rebranded as Sky, announced a new version of its $5 billion stablecoin DAI but it failed to capture the attention of crypto enthusiasts.

Observers noted that the new token, called USDS, contains code that will allow the issuer to freeze the asset remotely.

This feature is also available in some of the largest stablecoins from centralized issuers, such as Circle’s USDC and Tether’s USDT, which allows companies to freeze assets if the tokens are used for illegal activities. Last week, Tether, for example, teamed up with the U.S. Department of Justice to seize $5 million worth of USDT that was used in fraud.

However, this feature goes against many of MakerDAO’s decentralized finance (DeFi) policies, and naturally the community is against it.

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MakerDAO co-founder Rune Christensen explained the situation in a post: “Upgrading tokens to USDS is completely optional and the freeze function is only available in USDS.”

“Dai is developed as an immutable smart contract and therefore cannot be changed.”

AJ Scolaro, senior analyst at crypto research firm Messari, said concerns are overblown given that the feature is public and is required for widespread adoption of a stablecoin backed by U.S. Treasuries.

“The instant USDS fud (fear, uncertainty, despair) is ridiculous. We knew about the freeze function a few months ago. This is a 100% required feature to safely scale an RWA-backed stablecoin.”

“A large decentralized stablecoin should be both user-driven and legally compliant. PureDai would be a good alternative proposition for those who are skeptical.”