The concept of RWA has become popular, but the real issues are often hidden in the details. Using compliant stablecoins like USD1 as collateral may seem to stabilize the price peg at first glance, but in reality, it extends regulatory oversight into decentralized protocols.

Simply put, as a compliant stablecoin, USD1's smart contracts inevitably incorporate freezing and blacklisting features—standard measures to comply with regulations. Where is the problem? Once an address of a treasury or liquidity pool is flagged by regulatory authorities, the underlying USD1 collateral could be frozen on-chain instantly. This is no small matter; it directly results in protocol assets being locked, causing systemic risks to skyrocket.

The probability is low, but for decentralized protocols committed to resisting censorship, this is like a hidden trap laid to attract institutional funds—does that sound familiar? This is the practical trade-off.