Censorship-resistant “dark stablecoins” could come in increasing demand as governments tighten their oversight of the industry. 

Stablecoins have been used for various groups to store assets due to a lack of government interference; however, with regulations pending, that could soon change, Ki Young Ju, CEO of crypto analytics firm CryptoQuant, said in a May 11 X post.

“Soon, any stablecoin issued by a country could face strict govt regulation, similar to traditional banks. Transfers might automatically trigger tax collection through smart contracts, and wallets could be frozen or require paperwork based on government rules,” he said.

“People who used stablecoins for big international transfers might start looking for censorship-resistant dark stablecoins instead.”

On the heels of US President Donald Trump’s crypto-friendly administration assuming power earlier this year, lawmakers are weighing stablecoin legislation, which seeks to regulate US stablecoins, ensuring their legal use for payments. 

The European Union has already brought in its Markets in Crypto-Assets (MiCA) regulation, which, among other measures, mandates that stablecoins be regulated and transparent.

Source: Ki Young Ju

Ju speculates that a dark or private stablecoin could be created as an algorithmic stablecoin, with the value maintained through algorithmic mechanisms rather than being pegged to an external asset like gold, which makes it susceptible to interference from authorities. 

“One possible example could be a decentralized stablecoin that follows the price of regulated coins like USDC using data oracles like Chainlink,” he said.

Another way would be stablecoins issued by countries that don’t censor financial transactions, or, for example, if Tether chooses not to comply with US government regulations in the future.

“USDT itself used to be considered a censorship-resistant stablecoin. If Tether chooses not to comply with US government regulations under a future Trump administration, it could become a dark stablecoin in an increasingly censored internet economy,” Ju said.

Privacy technology in crypto is already being used

Zcash (ZEC) and Monero (XMR) — while they aren’t stablecoins —already shield transactions and allow users to send and receive funds without revealing their transaction data on the blockchain.

Related: Russia finance ministry official floats country making own stablecoins: Report

Several projects are also working on using similar technology for stablecoins, such as Zephyr Protocol, a Monero fork that hides transactions from being revealed on the blockchain. PARScoin also hides user identities, transaction values, and links to past transactions.

The market cap of US dollar-denominated stablecoins has continued to grow, crossing $230 billion in April, a report from investment banking giant Citigroup found. That’s an increase of 54% since last year, with Tether (USDT) and USDC (USDC) dominating 90% of the market.

Meanwhile, total stablecoin volumes hit $27.6 trillion in 2024, surpassing the combined volumes of Visa and Mastercard by 7.7%. 

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Tinian, a small island in the US territory of the Northern Mariana Islands, could get a second chance at launching a stablecoin after the territory’s Senate voted to override the governor’s earlier veto of its stablecoin bill.

On May 9, the Northern Mariana Islands Senate voted 7-1 to override Governor Arnold Palacios’ April 11 veto of the bill, which would allow the Tinian local government to issue licenses to internet casinos and includes a provision for the Tinian treasurer to issue, manage and redeem a “Tinian Stable Token.” 

The bill will now head to the 20-member Northern Mariana Islands House, which will need a two-thirds majority vote to override the veto and pass the bill into law.

If the House is quick to pass the bill, the Tinian government could be in the lead for the first US public entity to issue a stablecoin. It’s in a race against the state of Wyoming, which is aiming to issue a stablecoin by July.

Tinian is governed by the local government, the Municipality of Tinian and Aguiguan, and is one of four municipalities in the Commonwealth of the Northern Mariana Islands, a small US territory in the Pacific north of Guam. 

Tinian has just over 2,000 residents, and its economy heavily relies on tourism.

Senators push “much-needed” bill despite “deep concerns” 

Governor Palacios said in his letter last month that he vetoed the bill as it “presents several legal issues and may be unconstitutional” and would regulate an activity that could not “be clearly restricted” to Tinian.

Democrat Senator Celina Babauta, the only one to vote against overriding the veto, said before the vote that she had “deep concerns with respect to the lack of resources, the lack of manpower” to enforce the gambling law and police use of the stablecoin.

“We are restricted by federal statutes and must comply with that,” she added.

Senator Celina Babauta (right) delivers remarks at a Senate hearing alongside Senator Karl King-Nabors (middle). Source: YouTube

“We struggle with trying to find creative and innovative ways to diversify our economy and our industries,” Babauta said. “I don’t believe that gambling is the only thing that we can be looking forward to every single time there’s an investor that comes in.”

However, Republican Senator Karl King-Nabors, who represents Tinian and co-authored the bill, said it was “a far more stringent and efficient way to oversee the online gaming aspect.”

“This stablecoin is tracked through software, and if anything, it allows for more transparency when it comes to the Tinian Casino Gaming Control Commission,” he added.

King-Nabors said the bill aligned with “much-needed” economic diversification measures, as the local economy was yet to bounce back from a COVID-19 pandemic-induced slump.

“This legislation stands at a time where we’re going through so much economic hardships,” King-Nabors added. “I find it difficult that we’re constantly having to step over obstacles when we’re trying to incentivize and look for ways to bring in revenue that don’t affect our environment, that don’t require a brick and mortar, that don’t impact our land.”

Tinian bids for fully-backed stablecoin

Republican Senator for Tinian, Jude Hofschneider, led the introduction of the bill in February, which aims to amend a local Tinian law to allow internet-only casino licenses, along with allowing the island to launch a fully backed US dollar-pegged stablecoin.

A four-member Tinian delegation to the Marianas legislature, which includes Hofschneider and King-Nabors, had passed the bill to Governor Palacios in a unanimous vote on March 12.

Statements shared with Cointelegraph in March said the stablecoin is called the Marianas US Dollar (MUSD) and will be backed by cash and US Treasury bills held in reserve by the Tinian Municipal Treasury.

The Tinian government chose tech services firm Marianas Rai Corporation, based in the Northern Mariana Islands’ capital of Saipan, as the exclusive infrastructure provider to issue and redeem MUSD.

MUSD is built on the eCash blockchain, a network that rebranded from Bitcoin Cash ABC in 2021 and is a fork of Bitcoin Cash, a blockchain that split off from Bitcoin in 2017.

Related: Senator Tim Scott slams partisan politics for failed stablecoin bill 

Marianas Rai Corp. co-founder and technology chief Vin Armani told Cointelegraph in April that it was “in active discussions with potential partners” about launching the token after Governor Palacios’ veto and was “poised to act quickly” as US Congress is looking to pass stablecoin laws.

In the US, one stablecoin bill, the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, has since stalled in Congress after Senate Democrats pulled support for the bill due to concerns about President Donald Trump’s sprawling crypto ventures.

Another stablecoin-regulating bill in the House, the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, has also lost Democrat support due to Trump’s crypto tie-ups.

Legal Panel: Crypto wanted to overthrow banks, now it’s becoming them in stablecoin fight 

Hardware wallet provider Ledger has confirmed its Discord server is secure again after an attacker compromised a moderator’s account to post scam links on May 11 to trick users into revealing their seed phrases on a third-party website.

“One of our contracted moderators had their account compromised, which allowed a malicious bot to post scam links in one channel,” Ledger team member Quintin Boatwright wrote on the Ledger Discord server. 

“The issue was quickly contained: the compromised account was removed, the bot was deleted, the website was reported, and all relevant permissions were reviewed and secured.”

Some members in Ledger’s Discord channel claimed the attacker abused moderator privileges to ban and mute them as they tried to report the breach, possibly slowing Ledger’s reaction.

Boatwright said the security breach was an isolated incident and that Ledger has taken additional measures to strengthen its security on Discord, a chat platform many crypto projects use to share protocol developments and engage with their community. 

Using the compromised Ledger community manager account, the hacker told Ledger Discord members that there was a recently discovered vulnerability in the firm’s security systems and strongly urged all users to verify their recovery phrases with a scam link, according to several screenshots shared on X. 

Ledger users were asked to connect their wallets and follow on-screen instructions.

Source: ecurrencyholder

It isn’t clear whether anyone was affected by the security breach. Cointelegraph has reached out to Ledger for comment.

Ledger scammers were sending physical letters last month 

In April, scammers were mailing physical letters to owners of Ledger hardware wallets, asking them to validate their private seed phrases in a bid to access and empty the wallets.

The letter used Ledger’s logo, business address and a reference number to feign legitimacy and asked users to scan a QR code and enter the wallet’s recovery phrase.

One Ledger user who received the letter speculated whether scammers were sending letters to Ledger customers whose data was leaked in July 2020.

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That incident saw a hacker breach Ledger’s database and dump the personal information of over 270,000 of its customers online, which included names, phone numbers and home addresses.

The following year, several Ledger users claimed to have been mailed fake Ledger devices that were tampered with and designed to install malware upon use, Bleeping Computer reported at the time.

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