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Coinbase Removes USD Coin (USDC)”Backed By Dollar” Statement

Tether (USDT) now has an advantage over USD Coin (USDC). As a result, Circle’s dollar-pegged stablecoin, USDC, lost one of its largest leveraging stances to its main competitor, USDT.

Coinbase, one of the prominent players in crypto exchange, has made a crucial change on the USD Coin page. The crypto exchange placed the change on its website.

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This was in response to an audit that exposed that a few USDC’s reserves were not held in cash. The audit discovery contradicts the statement that every USDC has a corresponding backing of one dollar in a bank account.

Coinbase Brings New Changes By Bringing USD Coin Into Public

From the recent change, the entry statement on the USD Coin webpage is also affected. Coinbase visitors now get a new welcome statement saying that USDC has backing by fully reserved assets.

In addition, the statement now says that every USDC is backed by one dollar or an equivalent asset with fair value. Also, it mentions that the backing is held in accounts under US-regulated financial institutions.

USD Coin has more than $28 billion and is rated as the eighth-largest digital asset. Furthermore, it is the second-largest stablecoin, coming closing behind Tether that takes the top. Tether’s latest Consolidated Reserves Report reveals that the cryptocurrency has about $63 billion assets in its custody.

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From its time of launch, USDC operates as a stablecoin fully backed by US dollars. Conversely, Tether, its major competitor, has been involved in multiple legal fights with regulators. The contributory factor is the hidden commercial paper that claims about half of its total reserves.

Nevertheless, the audit of Grant Horton, a multi-national tax advisory company, comes the discovery about the true backing for USDC. The audit reveals that only 61% of USDC’s reserves are in cash and cash equivalents. Also, some reserves that accrued to 9% are in commercial paper forms.

USD Coin thrives in the green zone as the market gets ready for a bullish run | Source: USDCUSD on TradingView.com

From the definition of the audit reports, cash consists of deposits with banks and Government Obligation Money Market Funds. It further defined cash equivalents as securities that have a 90-day original maturity period or less.

Furthermore, Yankee certificates of deposit and U.S. Treasuries were discovered to be part of USDC reserves from the audit. These included reserves have no full backing by US dollars held in a bank account. Bloomberg explained that Coinbase changed USD Coin webpage wording when the crypto exchange received the audit report.

Reacting to the recent report, Andrew Schmitt, Coinbase spokesperson, said that there’s the backing of $1 or its equivalent fair value asset for each USDC. He explained that the redemption of 1 USDC remains $1 for users. Also, he mentioned that the company has additional information on its website for a clearer understanding of USDC reserves.

On its part, the partnering company with Coinbase that oversees USDC, Circle, made a recent announcement. The company discloses its plan of becoming a full-reserve national digital currency bank in the U.S.

The company’s CEO, Jeremy Allaire, affirms the company’s readiness to comply with all regulatory and risk management requirements.

Through his announcement, Allaire expresses his expectation for USDC rising to hundreds of billions of dollars. Also, he said the stablecoin could move to support more economic activities and be a prominent tool in financial and commercial advancements.

Featured image from CoinCodex, chart from TradingView.com

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The USDC Stablecoin Will Soon Expand Its Reach To 10 More Networks

The second biggest stablecoin by market capitalization is already a multi-blockchain project. Soon, though, USDC will live almost everywhere. According to Coindesk, it will soon be available in, “Avalanche, Celo, Flow, Hedera, Kava, Nervos, Polkadot, Stacks, Tezos, and Tron.” That will bring the total to 14; since USDC is already functional in Ethereum, Algorand, Stellar, and Solana.

The biggest stablecoin, Tether or USDT, is only available in 8 of those. Currently, the most used stablecoin is Tron’s version of USDT. 

Related Reading | Is USDC’s Billion Dollar Growth A Sign Crypto Smart Money Is Ditching Tether?

With that in mind, CENTRE said:

“We anticipate that USDC on these blockchain platforms and multichain protocols will further accelerate the use of the world’s fastest growing digital dollar currency.”

The consortium that runs USDC, CENTRE, is a joint venture between Coinbase and payments processor Circle. The information comes from, “a draft announcement from USDC administrator CENTRE obtained by CoinDesk.”

USDC market cap for 06/30/2016 - TradingView

USDC market capitalization | Source: TradingView.com

What Is USDC And How Does It Work?

For this, we have to go back to the academy. Coinzilla informs us:

USDC is one of the fastest-growing stablecoins pegged 1 to 1 to the US Dollar.

What is more remarkable is that Circle, the company that developed the stablecoin, is actually holding the amount of money required for backing the USDC in circulation. 

That’s definitely a shot at USDT. Tether’s audit and legal issues have been a topic of contention in the cryptocurrency community for a while now. Can they back all the Tether they’ve minted? A burning question that’s harder to answer than you’d think. 

For what is worth, USDC’s April independent audit is on the public record and says:

  • USD Coin (“USDC”) tokens issued and outstanding less tokens allowed but not issued (218,807,037) and less blacklisted tokens = 14,697,267,257 USDC  

  • US Dollars held in custody accounts are at least equal or greater than the USDC tokens outstanding at the Report Date and Time. 

Back to Coinzilla’s academy, the stablecoin’s characteristics are:

In essence, USD Coin is an ERC-20 token that functions through the Ethereum Network. Nowadays, USDC transactions can also be settled through Algorand, Solana, and Stellar’s infrastructures.

Since the launch of USDC 2.0, the payment process is simplified, the gas fees being paid directly in USDC. 

Related Reading | Circle’s Stablecoin USDC Passes Independent Audit, Fully Backed by USD

Stablecoins Are Supposed To Rule The USA in 2021

The official love affair between the US government and stablecoins started last January, when Jeremy Allaire from Circle announced that, “the largest US banking regulator with new guidance allowing US banks to use public blockchains and dollar stablecoins as a settlement infrastructure in the US financial system.” According to him, “Decentralized, permissionless, open source and internet mediated software is literally becoming the foundation for not just the US financial system but for the global economy.”

Recently, Randal K. Quarles, the Federal Reserve’s Vice Chair for Supervision, considerably raised the stakes:

In my judgment, we do not need to fear stablecoins. The Federal Reserve has traditionally supported responsible private-sector innovation. Consistent with this tradition, I believe that we must take strong account of the potential benefits of stablecoins, including the possibility that a U.S. dollar stablecoin might support the role of the dollar in the global economy. For example, a global U.S. dollar stablecoin network could encourage use of the dollar by making cross-border payments faster and cheaper, and it potentially could be deployed much faster and with fewer downsides than a CBDC.

Will stablecoins like USDC and USDT substitute the Digital Dollar project? Could they be an alternative to CBDCs? We’ll have to wait and see.

Featured Images by NeONBRAND on Unsplash - Charts by TradingView