what does 'freeze the wallets' mean? I have a bunch of Tether but it's all self-custodied in a wallet with a seed phrase. I am assuming they couldn't freeze that. But could they freeze individual tokens sitting in a particular wallet/address? Or do Tether offer custody services or something?
The USDT smart contract maintains a denylist of accounts and the contract's designated admin key can add and remove entries to this list. So you may still "own" tokens after you're on the list, but every action your account tries to perform on these tokens will be denied by the contract.
It is not because of the cryptographic keys that Bitcoin is permissionless; that's just a technical solution. Instead, it's because valid PoW cannot be gatekept (but it could be attacked - at a cost) and valid transactions only depend on the spending constraints being honored (but it too could be attacked - at a long-term cost.) This means that as long as you can mine a block with a tiny device, currently that means a BitAxe or some entry level miner, and no valid spend will be rejected after it was mined, Bitcoin remains permissionless.
Most smart contracts on proof of stake chains have neither of these properties: the contracts nearly all have admin keys that can freeze any funds (or inflate the supply), and in order to produce a block, you need to already have bought in, inside the chain. Your keys and seed phrases are meaningless for transactional freedom, because you're being gatekept on 2 other layers.
The whole "you own your keys and therefore you're sovereign" on most of these chains and especially for stablecoins is therefore deceptive. Don't believe their lies, because they are simply trying to ride a Bitcoin solution while having tricks built in that aren't advertised.
U.S. officials began tracking the payments and even partnered with Tether to freeze many digital wallets linked to these oil payments due to irregularities. Some analysts claim that investigators used these records to track funds that the Maduro government had moved illegally.
When a national currency collapses and a banking system becomes untrustworthy people inevitably look for alternatives that work in the real world and stablecoins like USDT happen to fill that gap. What makes this case particularly significant is not just that individuals are using USDT to preserve savings but that the country’s largest state-owned oil company has adopted it as an operational necessity to keep trade alive under international sanctions.
This is an economic experiment playing out in real time. It shows that digital assets once dismissed as niche investments are now functioning as core infrastructure in broken economies. The public ledger transparency of USDT turns out to be both a strength and a vulnerability. It allows easy tracking of legitimate transactions while also enabling authorities to trace and freeze wallets linked to questionable activity. This duality means that while stablecoins offer freedom from degraded local systems they remain within reach of global enforcement mechanisms.
The failure of the Petro is telling. People did not abandon the bolivar just to adopt another government controlled system. They chose USDT precisely because it is decentralized enough to avoid the problems of state interference yet stable enough to serve the needs of everyday commerce. In that sense USDT is becoming more than a stopgap. It could be the backbone of how Venezuelans conduct trade save money and receive remittances for years to come.
The lesson here is broader than Venezuela. In any country where trust in local currency and banking collapses a neutral digital asset that maintains stable value can quickly become a parallel economy. And when that happens policymakers and economists need to decide whether to facilitate its use regulate it or attempt to replace it. Ignoring it is not an option because as Venezuela’s story shows people will use what works and abandon what fails.
what does 'freeze the wallets' mean? I have a bunch of Tether but it's all self-custodied in a wallet with a seed phrase. I am assuming they couldn't freeze that. But could they freeze individual tokens sitting in a particular wallet/address? Or do Tether offer custody services or something?
The USDT smart contract maintains a denylist of accounts and the contract's designated admin key can add and remove entries to this list. So you may still "own" tokens after you're on the list, but every action your account tries to perform on these tokens will be denied by the contract.
It is not because of the cryptographic keys that Bitcoin is permissionless; that's just a technical solution. Instead, it's because valid PoW cannot be gatekept (but it could be attacked - at a cost) and valid transactions only depend on the spending constraints being honored (but it too could be attacked - at a long-term cost.) This means that as long as you can mine a block with a tiny device, currently that means a BitAxe or some entry level miner, and no valid spend will be rejected after it was mined, Bitcoin remains permissionless.
Most smart contracts on proof of stake chains have neither of these properties: the contracts nearly all have admin keys that can freeze any funds (or inflate the supply), and in order to produce a block, you need to already have bought in, inside the chain. Your keys and seed phrases are meaningless for transactional freedom, because you're being gatekept on 2 other layers.
The whole "you own your keys and therefore you're sovereign" on most of these chains and especially for stablecoins is therefore deceptive. Don't believe their lies, because they are simply trying to ride a Bitcoin solution while having tricks built in that aren't advertised.
Very interesting, thanks for the high level technical overview @optimism, much appreciated
And this is where you are wrong. They absolutely can.
U.S. officials began tracking the payments and even partnered with Tether to freeze many digital wallets linked to these oil payments due to irregularities. Some analysts claim that investigators used these records to track funds that the Maduro government had moved illegally.
deleted by author
Although, I will say the article reads a little breathless. Might want to do a little double checking on it. Cool read though!
Also found this from WSJ
https://www.wsj.com/finance/currencies/maduros-crypto-backed-oil-deals-put-tether-at-center-of-venezuela-money-drama-3fc53b29
When a national currency collapses and a banking system becomes untrustworthy people inevitably look for alternatives that work in the real world and stablecoins like USDT happen to fill that gap. What makes this case particularly significant is not just that individuals are using USDT to preserve savings but that the country’s largest state-owned oil company has adopted it as an operational necessity to keep trade alive under international sanctions.
This is an economic experiment playing out in real time. It shows that digital assets once dismissed as niche investments are now functioning as core infrastructure in broken economies. The public ledger transparency of USDT turns out to be both a strength and a vulnerability. It allows easy tracking of legitimate transactions while also enabling authorities to trace and freeze wallets linked to questionable activity. This duality means that while stablecoins offer freedom from degraded local systems they remain within reach of global enforcement mechanisms.
The failure of the Petro is telling. People did not abandon the bolivar just to adopt another government controlled system. They chose USDT precisely because it is decentralized enough to avoid the problems of state interference yet stable enough to serve the needs of everyday commerce. In that sense USDT is becoming more than a stopgap. It could be the backbone of how Venezuelans conduct trade save money and receive remittances for years to come.
The lesson here is broader than Venezuela. In any country where trust in local currency and banking collapses a neutral digital asset that maintains stable value can quickly become a parallel economy. And when that happens policymakers and economists need to decide whether to facilitate its use regulate it or attempt to replace it. Ignoring it is not an option because as Venezuela’s story shows people will use what works and abandon what fails.