Crypto stablecoin USDC to be backed 100pc by cash following criticism
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The president of US exchange Coinbase has promised changes to the investment portfolio backing the second-biggest stablecoin following accusations it had been deceptive about its asset reserves.
Coinbase chief operating officer and president Emilie Choi said in a tweet-thread that beginning next month, USD Coin reserves “will be held cash and short-duration US government treasuries”.
Choi said that Coinbase’s language “could have been clearer” when the Nasdaq-listed company promised that every USDC is “backed by a dollar in a bank account”.
In fact, beginning in May, the assets backing USDC included commercial paper, corporate bonds and municipal bonds.
4/ When Circle shared their May report about USDC reserves in late July (which included a more diversified pool of investments for the first time) we should have moved faster to update statements like that on our website. That was a mistake and Coinbase takes ownership for that.
— Emilie Choi (@emiliemc) August 23, 2021
Bloomberg News had highlighted the discrepancy in a damning report on August 12 with the headline, “Coinbase Vowed Token’s All-Cash Backing; That’s Not True”.
“You can’t market a product with falsities,” Columbia Law School lecturer Lev Menand had told the wire service, adding that the failure to disclose the truth could be considered a consumer protection violation.
“There’s a material difference and a huge amount of evidence that something backed by dollars held in a bank account is different than something backed by things like US Treasuries or corporate paper.”
Only 61 per cent of the USDC’s reserves were held in cash and cash equivalents in May, according to the attestation report released in July to accounting giant Grant Thornton.
The stablecoin is a project of the CENTRE Consortium, founded by Coinbase and payments company Circle.
Circle has announced to go public via a SPAC (special purpose acquisition company) and become a national digital bank regulated by Federal Reserve and the US Treasury.
“The national dialogue around dollar digital currencies is rapidly evolving, and we are encouraged by the work of policy makers and federal agencies to understand the opportunities presented by this breakthrough technology,” Circle said.
“As industry and government work together on the appropriate future supervisory standards, we are committed to maintaining or exceeding those standards, driving innovation, and building reliable, trusted, secure and compliant infrastructure for dollars on the internet.”
There are 26.9 billion USD Coins circulating, making it the No. 9 cryptocurrency and the No. 2 stablecoin. Tether is No. 1 (and the No. 5 crypto), with a market cap of US$65 billion.