Paxos [PAX] prone to freeze and burn by governments; Binance CEO offers retaliates

On 21st September, Binance, one of the biggest cryptocurrency exchange platform, announced that they would be listing Paxos Standard Token [PAX] on their exchange platform. The coin will be paired with Bitcoin [BTC] and Binance Coin [BNB]. The platform has opened the deposit services and information related to the trading services will be announced in the coming days.

Along with the announcement of listing the stable coin, Binance has stated that Paxos will be publishing a report of their balance sheet on a monthly basis, audited by one of the top auditing firms.

PAX is a stable coin which holds a fixed value and is backed by the US dollar [1 PAS = $1 USD]. The coin is a ERC20 token which is issued by the Paxos Trust Company.

However, John Backus, a Twitterati, stated that Paxos has given direct control of their smart contracts to the law enforcement agency. This was a huge concern as the government can burn or freeze any users PAX stablecoin.

The developers of PAX had created a backdoor which would allow law enforcement to freeze wallets at will, and even destroy any assets they possess.

According to the statement, developers of PAX have coded commands like “setLawEnforcementRole”, “freeze” and “wipeFrozenAddress” on the backdoor. This would allow anyone with the administrative access to freeze wallets at will and even destroy any assets they possess.

Blockchain developer, John Backus opined that giving the government a direct access to the smart contracts was unnecessary and recommended alternatives which were not so extreme.

He stated that the normal legal process could be followed where the governments would request Paxos to freeze the wallets after a thorough investigation. Another alternative was to allow law enforcement agencies to freeze the wallets but require Paxos’s permission to burn the tokens.

However, the CEO of Binance, Changpeng Zhao, popularly known as ‘CZ’ stated that PAX  spoke about the whole controversy post the announcement about listing a regulated stable coin on his Twitter account.

CZ’s announcement regarding the listing:

“Regulated stable coins serve as a middle ground where regulators maintain control, but the token also offers far more freedom than traditional fiat for users. Hope more will copy/follow/improve, and for other fiat currencies too.”

Succeeding the announcement, another Twitterati pointed out the statement made by John Backus. To which CZ said:

“that’s what “regulated” means. All regulated stable coins have this. Even the ERC20 version of the USDT has it [just may not be for LE]”

Dr. Grummel Smurf said:

“Srsly? Means at any given time the law enforcement role dude has the option to delete everything you put besides playing the trade-up with tether (or whatever is used) game? Now I know why I only trade crypto-crypto. This is a damokles sword on a very thin spider thread.”

CZ replied to the above statement by asking the Twitterati to ‘stay’ with crypto to crypto trading.