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The Coinbase website now claims that USD Coin is “backed by completely reserved assets,” as opposed to the now-defunct claim that it is “backed by US dollars in a bank account.”
USD Coin (USDC), Circle’s dollar-pegged stablecoin, appears to have lost one of its primary competitive advantages against Tether (USDT).
Following an audit that revealed that not all of USDC’s reserves were stored in cash, major crypto exchange Coinbase made an essential adjustment to the USD Coin page on its website. This contradicted the previous assertion that “each USDC is backed by one US dollar deposited in a bank account.”
Coinbase visitors are now greeted with a statement that says USDC is “backed by fully reserved assets” when they enter the USD Coin webpage. This new claim states:
“Each USDC is backed by one dollar or asset with equivalent fair value, which is held in accounts with US regulated financial institutions.”
With a total market capitalisation of more than $28 billion, USD Coin is the eighth-largest cryptocurrency. USDC is also the second-largest stablecoin, trailing only Tether, which has almost $63 billion in total assets, according to its most recent Consolidated Reserves Report.
USDC has grown in popularity as a stablecoin that is fully backed by US dollars since its debut. Tether, on the other hand, has been in hot water with authorities on multiple occasions due to unreported commercial paper accounting for about half of USDT’s total reserves.
However, according to an audit conducted by multi-national tax consultancy company Grant Horton, 61 percent of USDC’s reserves were stored in cash and cash equivalents, while 9 percent were held in commercial paper. Cash is defined in the audit report as deposits at banks and Government Obligation Money Market Funds, while cash equivalents are securities with an original maturity of less than or equal to 90 days.
The report revealed the USDC reserves include Yankee certificates of deposit and U.S. Treasuries and certainly are not “fully backed by U.S. dollar held in a bank account.” According to Bloomberg, the wording for the USD Coin on the website was changed the day the mainstream media contacted Coinbase about the report and related marketing material.
Coinbase spokesperson Andrew Schmitt reiterated to reporters that each USDC is backed by $1 or asset with equivalent fair value:
“Users can always redeem 1 USD Coin for US$1.00. We have added additional detail to our website for customers to understand more about USDC reserves.”
Circle, the business that manages USDC in collaboration with Coinbase under The Centre Consortium, recently revealed aspirations to become the United States’ first full-reserve national digital currency bank. Circle CEO Jeremy Allaire stated that the organisation is willing to operate under the oversight and risk management needs of regulators.
As part of the statement, he stated that USDC will grow to “hundreds of billions of dollars in circulation,” supporting high-trust economic activity and becoming a popular instrument in financial services and online commerce applications.