Cardano does not have USDT and USDC because it adheres to the principles of decentralization at the protocol design level and does not allow token issuers to censor transactions. Cardano employs a so-called multi-asset ledger. Tokens are stored directly in the ledger and treated similarly to ADA coins. No smart contract is needed to mint tokens on Cardano. Issuers must define a minting policy script and sign a specially created mint transaction. To issue tokens on EVM platforms, it is necessary to deploy a smart contract, which is then used for transferring tokens. The token issuer can define support for transaction censorship and token freezing in the contract. Let's explore how the two approaches differ and think about what Cardano should be. TLDR USDT and USDC can only be issued by complying with the requirements of the regulators. The ecosystem's dependence on a stablecoin that can be frozen at any time by a centralized entity is very dangerous. Cardano does not have USDT and USDC because it is unable to meet the requirements of the regulators. Owners are always in full control of their tokens in the Cardano ecosystem. Even the issuer cannot change that. It can't be said that Cardano has fewer capabilities than EVM platforms just because it doesn't allow transaction censorship. Regulatory compliant stablecoins The issuers of the well-known stablecoins USDT and USDC had to comply with the requirements of regulators in order to be allowed to tokenize USD on blockchain platforms. It's important to note that this has brought huge liquidity to the ecosystem and stablecoins are one of by far the most used tokens. DeFi ecosystems definitely benefit from the ability to use this kind of stablecoins. Unfortunately, and users are not always fully aware of this, this comes at the cost of violating the basic principles of decentralization. Circle, issuers of the dollar-pegged USDC stablecoin, recently froze about 75,000 USDC in user funds with ties to Tornado Cash, in compliance with U.S. sanctions. Circle did not admit wrongdoing in agreeing with the U.S. government sanctions on Tornado Cash. However, the CEO of Circle believes that the regulatory intervention crossed a major threshold in the history of the internet and the history of open blockchain finance. How is it actually possible to censor transactions on EVM-compatible platforms? When people want to mint fungible tokens on Ethereum, they use standards like ERC-20, ERC-721, or ERC-1155. These standards are essentially smart contracts. Smart contracts define a common list of rules that EVM tokens should adhere to. A customized and deployed smart contract is then used each time tokens move from address to address. A smart contract can define any behavior that EVM will allow and this can be the ability to censor transactions based on a blacklist or freeze an account. The owner may lose the ability to spend or use the tokens in any way. See for yourself what the smart contract for Tether USD contains. A deployed smart contract can never be stopped or otherwise manipulated by a third party. Ethereum and other EVM-compatible platforms are mostly decentralized at the network level. Token issuers, however, can write whatever they want in smart contracts, including the things described above. People sometimes ask why Cardano doesn't have USDT and USDC. Cardano is unable to censor transactions or freeze an account. All tokens have exactly the same properties as ADA coins. Transfer of tokens is done directly by the protocol through transactions. Thus, Cardano is unable to meet the requirements of regulators at its first layer. Cardano has native assets Cardano has an accounting infrastructure for assets defined in the ledger model and can transfer tokens and NFTs natively. Tokens are stored directly in the ledger similar to ADA coins. No smart contract is needed to mint tokens on Cardano. Issuers must define a minting policy (monetary script) and sign a specially created mint transaction. The rules might specify who (what private key owner) has control over the asset supply through minting and burning. The owner of the private key (issuer) can only burn tokens that he has at his address. It is not possible to affect the existence of tokens at other users' addresses in any way. In other words, the issuer is not able to burn coins remotely or restrict the token owner from signing the transaction and sending the tokens. Once the tokens are minted, Cardano does not need any smart contract to interact with the tokens. All the logic for transmission, transaction fee calculation, etc. happens at the protocol level, similar to sending ADA coins. Owners are always in full control of their tokens and the issuer cannot change that. The question arises whether it is a pity that Cardano cannot have traditional stablecoins and whether its functionality is somehow limited. Let's take a look. If the token issuer can retain control of the tokens, it is not only inconvenient for the user, but also in the context of other services. Ethereum DEX can have a liquidity pool in which there would be USDC and ETH. If the authority ordered to freeze of all USDC tokens, it would not be possible to withdraw even ETH from the pool. The whole ecosystem could be crippled. The ecosystem's dependence on a stablecoin that can be frozen at any time by a centralized entity is very dangerous. Some may think that regulators will never order the stopping of USD-backed stablecoins and that Cardano is losing users who want to use standard stablecoins. EVM-compatible platforms can thrive thanks to stablecoins despite all the risks, and Cardano will go unnoticed only because it clings to the principles of decentralization. Regardless of the fact that Cardano can 100% guarantee unconditional ownership of tokens, other platforms will see mass adoption due to the larger number of users who use USDT and USDC and don't care as much about principles. One could even argue that it is fair to freeze the account of someone who has been convicted of criminal activity. The blockchain industry should not be a safe place for criminals and a way to circumvent the law. It can't be said that Cardano has fewer capabilities than EVM platforms just because it doesn't allow transaction censorship. Each individual user should be free to choose the level of risk they want to take. The IOG team should certainly not back away from the principles of decentralization at the first protocol layer. If something should be changed, and it's definitely not a good idea, it should be decided by the community. We firmly believe that a majority of the Cardano community would vote to keep the status quo. There are good reasons for this. If the Cardano ecosystem is to have stablecoins that remain under the control of a central authority, let it have them on sidechains and second layers. It's definitely not a good idea to have them on the first layer. The Cardano ecosystem will have a decentralized overcollateralized stablecoin DJED and a USD-backed stablecoin USDA. We don't need USDT and USDC. We have no idea how Emurgo managed to get the license required for USDA issuance and it's certainly something to ask about. Conclusion We think that the Cardano community should insist on the principles of decentralization even though it might cost us a smaller adoption rate. Potential lower adoption at a stage when the entire blockchain industry is in its infancy may be a temporary phenomenon. It may change dramatically just because of insistence on principles. The blockchain industry is expected to have different characteristics than the traditional financial world. If we 100% accept the rules of the game of the current system, we won't create anything new. Self-custody is not self-custody if a third party can freeze the tokens you hold at your own address. Together we should look for ways to build a system that users can use without fear of breaking any rules. Only through debate can we build a system that remains decentralized and that regulators have no objections to.
