Where is a $ 1-backed stablecoin? No longer on Coinbase

Soon

  • USDC is a stablecoin issued by Circle.
  • Coinbase had claimed that the USDC was backed by dollars in a bank account.
  • Coinbase website now states that 1 USDC is not necessarily backed by 1 US dollar.

Coinbase, the San Francisco-based cryptocurrency exchange that has partnered with the USDC stablecoin in conjunction with the FinTech Circle company, no longer promises that USDC is fully backed by the dollar.

exchange has withdrawn the request from its website because, apparently, Circle does not have all of its reserves in USD.

Stable currencies are digital currencies pegged to the price of another asset. Traders can use them to maximize trading flexibility and take advantage of sudden price movements on an exchange without waiting for money transfers to be approved. y can also put their money to work by borrowing and charging interest on any number of platforms.

One way to guarantee the price of the USDC is to keep $ 1 in reserve for each stablecoin issued. For the record, that’s just under $ 28 billion.

“Each USDC is backed by one US dollar, which is held in a bank account,” Coinbase wrote on an earlier version of its website. It was recently changed to: “Each USDC is backed by a dollar or an equivalent fair value asset, which is held in accounts with regulated financial institutions in the United States.”

This change is consistent with a financial disclosure from Circle in July showing that the company only had 60% of the total USDC figure in cash. About a quarter is in certificates of deposit and US Treasury bonds, while the rest is in commercial paper and corporate bonds, financial instruments for owning someone else’s debt.

reversal is similar to what happened to stablecoin competitor Tether. For years that company trumpeted its 1: 1 dollar support for USDT currencies, until it changed the tune, first editing the web copy and then displaying statements showing that a significant portion of the reserves were held in other assets. Your most recent “warranty report” shows nearly half of your holdings are commercial paper.

Also Read Last Breath Negotiations Fail As All Korean Cryptocurrency Exchanges Except 4S Locked On Fiat Markets

Federal regulators recently looked at stablecoins, particularly Tether. Federal Reserve Chairman Jerome Powell told Congress in July that commercial paper is a good investment, as long as it isn’t. During a financial crisis, he said, “the market disappears. And that’s when people will want your money. ” Shortly after, Secretary of the Treasury Janet Yellen convened federal agency heads, including Powell, to speed up regulations on stablecoins.

Meanwhile, Circle and Coinbase are trying to play nice with regulators. In April, Coinbase became the first cryptocurrency exchange to be a publicly traded company in the United States, which means its financial and marketing information is under close surveillance. For its part, Circle said this week that it would become a “national digital currency bank.” How to Decipher It is reportedly not clear at this time if your plan will require changing your reserve ratios.

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