PAX Stablecoin ‘Law Enforcement’ Backdoor Allows Freezing And Seizing Cryptos

The fans of the new PAX coin have been hit by a controversial discovery now. According to reports, the developers of this new stablecoin backed by the USD have created a backdoor that allows law enforcement to freeze or even seize assets from the tokens being held by someone.

This function is called setLawEnforcementRole and it was created by the PAX developers to work with the government to enforce the law. This means that anyone with the permission will be able to tamper with any wallet.

Some of the new functions that have scared the users the most are the “freeze” and “wipeFrozenAddress” commands, which lets anyone with the access freeze your money and even destroy it using the code.

PAX is an ERC20 token that uses the Ethereum blockchain as a basis. This makes it open for public review and this is how this “feature” or “vulnerability”, call it as you want, was discovered by a blockchain developer called John Backus. The code confirms that these functions were designed to let any authorized people (most likely the government) seize the assets.

About PAX

This new token was created to be a stablecoin permanently tied to the value of the United States Dollar, which means that it would be interchangeable with USD. The company went to the spotlight when its parent company, Paxos, has launched it last week.

After the launch, this issue was discovered. This token has the support of Wall Street, which is fully regulated and centralized so it is not very surprising that it comes with this type of backdoor to help the authorities.

The Centralization Issue

We are sure that the community will discuss this backdoor for the days to come. Centralization is a very touchy subject in the crypto world, as a part of the community is adamant that everything has to be decentralized and that it is a crime to let the authorities seize the assets from anyone.

Some do not share this vision, obviously, or tokens like PAX would not exist, but they are far from being a majority, as most of the crypto enthusiasts follow that is called “Satoshi's vision”, which was very anti-government and anti-centralization.

Independently from the government, one of the main issues that come to mind is that these backdoors could be very dangerous if they fall in the hands of people who are willing to use them for illegal actions like blackmailing.

PAX is not the only token to use this kind of technology, though, and the EOS network, one of the main networks in the crypto world, is known to use backdoors, too, and they are less regulated than PAX’s.

Bancor, another platform based on the Ethereum network, has used a similar trick lately and programmed its own backdoor into its exchange smart contracts which allowed the devs to retrieve almost $10 million USD after a digital raid, which was actually only possible because there were vulnerabilities in the code in the first place.

These backdoors may be common in most of the services in the world, but they are always a very controversial topic in the blockchain world. What do you think?