According to Cointelegraph, decentralized finance project Maker, now rebranded as Sky, has faced criticism over its newly upgraded stablecoin, USDS. Observers have noted that the stablecoin will include a 'freeze function,' raising concerns about the decentralization of the protocol.

The new stablecoin, USDS, is said to have a feature allowing its issuer to freeze the token. This has led to questions about the project's purpose, with some online commentators expressing their concerns. Monad marketer 'Tunez' questioned the move to his 155,000 followers on X, asking if it defeats the project's purpose.

In response, protocol co-founder Rune Christensen clarified in an Aug. 27 X post that there will be no freeze function at launch, only an upgrade ability. He explained that future governance could decide how to implement a freeze function based on comprehensive data to protect against various risk factors. In a May forum post, Christensen elaborated that the freeze function, when activated, is expected to comply with the legal systems of jurisdictions where Maker requires high legal certainty for enforcing recourse against real-world asset collateral.

Cinneamhain Ventures partner Adam Cochran commented that the freeze function is necessary to back the new stablecoin with US Treasuries. He noted that achieving T-bill yield backing, even through secondary treasury deals, would require a freeze function and a VPN jurisdiction blocker. Maker's rebranding to Sky and the renaming of its DAI stablecoin to USDS have further fueled criticism, especially since the project's website blocks access via VPNs.

Cochran added that the freeze function and VPN blocks are trade-offs the industry needs to consider. He emphasized that benefiting from the US traditional financial system requires adhering to its rules. Christensen also addressed claims that Phoenix Labs and Spark Protocol CEO Sam MacPherson said the new Dai would have a freeze function, calling them misleading. He clarified that Dai would continue to function as before and that upgrading to USDS is optional. Only USDS will have a freeze function, while Dai remains an immutable smart contract.

Centralized stablecoins like Tether (USDT) also have the ability to be frozen by the issuer, as demonstrated when Tether locked $5.2 million worth of USDT linked to phishing scams in May. It appears that Maker has adopted this approach to fulfill its 'Endgame' roadmap, which involves backing the stablecoin with real-world assets and scaling up its supply to rival Tether.