The Coinbase website now states that USD Coin is “backed by totally reserved assets,” contrary to the now-removed claim of “backed by U.S. dollars in a bank account.”
USD Coin (USDC), Circle’s dollar-pegged stablecoin, seemingly lost certainly one of its largest aggressive advantages over its rival, Tether (USDT).
Main crypto exchange Coinbase made an important change on the USD Coin web page on its website following an audit which revealed that not all of USDC’s reserves have been held in cash. This rain contrary to the earlier statement that “every USDC is backed by one U.S. dollar held in a bank account.”
Coinbase visitors are actually greeted with a press release that claims USDC is “backed by totally reserved assets” once they enter the USD Coin webpage. This new declaration states:
“Every USDC is backed by one dollar or asset with equal fair value, which is held in accounts with US regulated financial institutions.”
USD Coin stands is the eighth-largest cryptocurrency with a total market cap of over $28 billion. USDC is also the second-largest stablecoin after Tether, which has almost $63 billion in whole assets, based on its latest Consolidated Reserves Report.
Since its inception, USDC soared as a stablecoin fully backed by U.S. dollars. Then again, Tether discovered itself in hot water with regulators on multiple occasions due to undisclosed commercial paper accounting for nearly half of USDT’s whole reserves.
However, an audit by multi-national tax advisory agency Grant Horton showed that 61% of USDC’s reserves were held in cash and cash equivalents whereas 9% of the reserves have been held in commercial paper. The audit report defines money as deposits at banks and Authorities Obligation Cash Market Funds, whereas cash equivalents are outlined as securities with an original maturity less than or equal to 90 days.
The report revealed the USDC reserves include Yankee CDs and US. Treasuries and definitely aren’t “totally backed by U.S. dollar held in a checking account.” According to Bloomberg, the wording for the USD Coin on the website was modified the day the mainstream media contacted Coinbase in regards to the report and associated advertising and marketing materials.
Coinbase spokesman Andrew Schmitt reiterated to reporters that every USDC is backed by one dollar or asset with equal honest worth:
“Users can always redeem 1 USD Coin for US$1.00. We have now added extra element to our web site for customers to understand more about USDC reserves.”
Circle, the company that oversees USDC in partnership with Coinbase under The Centre consortium, recently introduced its plans to turn into a full-reserve nationwide digital forex bank in the US. Circle CEO Jeremy Allaire mentioned the corporate is keen to function underneath regulators’ supervision and risk management requirements.
As a part of the announcement, he mentioned that USDC will develop to “hundreds of billions of dollars in circulation,” persevering with to assist high-trust financial exercise and turn into a well-liked tool in monetary providers and web commerce purposes.