Censorship risk
The risk that an issuer or chain operator freezes, blocks, or refuses to settle a holder's tokens.
Centralised stablecoin issuers (Circle, Tether, Paxos) routinely freeze addresses linked to sanctioned entities or hacks; the OFAC Tornado Cash designations in 2022 forced USDC to blocklist over 30 addresses overnight. Decentralised alternatives (DAI, crvUSD, LUSD) are less censorable but typically pay this with smaller scale and more on-chain mechanism risk.
Related terms
- OFACThe US Treasury bureau that administers economic sanctions — its lists bind US-touching stablecoin issuers.
- SanctionsGovernment-imposed restrictions on financial transactions with specified persons, entities, or jurisdictions.
- Custody riskThe risk a custodian (bank, exchange, qualified custodian) loses, mismanages, or is denied access to reserves it holds.