For the USDC stablecoin, Coinbase has removed the statement that it is “backed by US dollars.” and now states that USD Coin is “backed by fully reserved assets.”
The Coinbase website now states that USD Coin is “backed by fully reserved assets,” as opposed to the previously removed claim that it was “backed by US dollars in a bank account.” USD Coin (USDC), Circle’s dollar-pegged stablecoin, appears to have lost one of its most significant competitive advantages over Tether (USDT).
Coinbase, the world’s largest cryptocurrency exchange, updated the USD Coin page on its website following an audit that revealed not all of USDC’s reserves were held in cash. This contradicted the previous assertion that “each USDC is backed by a single US dollar held in a bank account.”
When Coinbase visitors access the USD Coin webpage, they are now greeted with a statement stating that USDC is “backed by fully reserved assets.” This new claim reads as follows:
“Each USDC is backed by one dollar or asset with equivalent fair value, which is held in accounts with US regulated financial institutions.”
USD Coin is the eighth-largest cryptocurrency by market capitalization, with a total market cap of more than $28 billion. USDC is also the second-largest stablecoin, trailing only Tether, which has nearly $63 billion in total assets as of its most recent Consolidated Reserves Report.
USDC has grown in popularity as a stablecoin fully backed by US dollars since its inception. Tether, on the other hand, has run afoul of regulators on multiple occasions due to undisclosed commercial paper accounting for nearly half of USDT’s total reserves.
However, according to an audit conducted by multinational tax advisory firm Grant Horton, 61% of USDC’s reserves were held in cash and cash equivalents, while 9% were held in commercial paper. Cash is defined in the audit report as bank deposits and Government Obligation Money Market Funds, whereas cash equivalents are securities with an original maturity of less than or equal to 90 days.
According to the report, the USDC reserves include Yankee certificates of deposit and US Treasuries and are most emphatically not “completely backed by US dollars held in a bank account.” Bloomberg reports that the website’s language for the USD Coin was changed the day the mainstream media contacted Coinbase about the report and related marketing material. According to Coinbase spokesperson Andrew Schmitt, each USDC is backed by $1 or an asset with an 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 company that manages USDC in collaboration with Coinbase under The Centre Consortium, recently announced its intention to become the United States’ first full-reserve national digital currency bank. Circle CEO Jeremy Allaire stated that the company is willing to comply with regulators’ risk management and supervision requirements.
He stated in the announcement that USDC will grow to “hundreds of billions of dollars in circulation” and will continue to support high-trust economic activity while also becoming a popular tool in financial services and internet commerce applications.
Also Read: Coinbase Reports $2B Q2 Revenue, 95% From Transaction Fees
Wallets