This is a very complex and good question. I will write an in depth response, give me some time.

Circumventing Stablecoin Sanctions with Liquid. (Corrections and additions welcome. Artisan hand-made by a real human, not AI slop.) Scenario 1: 1. Party X receives payment in Bitcoin. 2. Assume X is freely able to broadcast a BTC tx on-chain, to a Liquid Federation peg-in address for L-BTC. 3. The Liquid Federation controls the multisig, issuance of L-BTC, and can enforce policy. In practice, this means that peg-ins can be refused, delayed, or flagged. Technically, the peg is designed to be deterministic, but functionaries are known entities and they operate in regulated jurisdictions so there *could* be legal pressure risk. 4. Assume Liquid issues X the L-BTC. L-BTC is free to move to other L-BTC addresses confidentially. 5. They want to swap L-BTC for L-USDT p2p. LP’s may refuse to quote you, but the swap can’t be stopped. 6. They want to swap L-BTC for L-USDT using an OTC/LP like Sideswap. The incoming L-BTC would be *very difficult*, but not impossible, at the protocol level to identify because of Liquid’s confidential transactions. In practice, these entities may require RFQ-style interaction (quote requests), see your network connection, behavior, and/or require API keys, accounts, or relationships. Real world detection and liquidity *could* reveal where it might be coming from and then Sideswap faces a choice similar to the Liquid Federation at Step 1.3. 7. Assume Sideswap swaps the L-BTC for L-USDT. 8. That L-USDT is free to move to other L-USDT addresses confidentially. Scenario 2: 1. Party X wants to receive payment in L-USDT. 2. X receives payment in self custody L-USDT, nothing can stop that. 3. X sends L-USDT to other L-USDT address, nothing can stop that. 4. X sends L-USDT to swap for L-BTC through Sideswap, similar to Scenario 1.6. 5. X swaps L-USDT for L-BTC p2p, same as Scenario 1.5. 6. X swaps L-BTC for BTC, similar to 1.3, but is better because L-BTC has extreme privacy relative to BTC. It would have to be somehow flagged (unlikely) by the federation to stop the peg-out. The biggest chokepoints are: 1. Redemption of USDT from Tether itself. Made irrelevant if you stay within Liquid. If X had L-USDT, Tether would not be able to directly identify which funds were theirs. They’d basically have to shut down all issuance on Liquid. Recent episode of @CITADEL DISPATCH they talk about this directly, from 14:30-21:00.

Fountain: Podcasts & Music

Citadel Dispatch • CD194: SIDESWAP - LIQUID PREDICTION MARKETS • Listen on Fountain

Scott, cofounder of SideSwap, joins the show to talk about what his team has been quietly building in the Liquid ecosystem. We cover SideSwap's ato...

2. Liquid peg in. 3. OTC/LP’s like Sideswap. 4. Liquidity. Currently there’s ~$300M in L-BTC and ~$100M in L-USDT, which places liquidity and privacy constraints on swaps.

Great q

But Iran would have to have “addresses” where the tokens lived right? Conceivably, circle or tether could just kill the addresses? I can’t imagine there’s much volume on liquid. And these would be beefy txs. But maybe I’m missing something