Stablecoin firms Tether and Circle look to allay fears of USDT and USDC exposure to FTX and Alameda
Coinhead
Coinhead
If you’re invested in crypto but keeping a good amount on the sidelines as “dry powder” in stablecoins, you might be wondering… is your USDT or USDC actually even safe right now amid the FTX implosion debacle?
In other words, do these major stablecoins have overexposure risk to the potentially broad-reaching, mind-boggling FTX fall from grace, and could they be affected in a potential crypto-contagion collapse?
While nothing, absolutely nothing, can now surprise us any more when it comes to crypto transparency, or lack thereof, Tether and Circle, the two separate issuers of the market-leading, centralised, US-dollar-pegged stablecoins USDT and USDC, have both moved to allay those sorts of fears.
Let’s take a look at what’s they’ve both said.
We’ll start with Circle’s USDC stablecoin, which has a market cap of just over US$43.1 billion.
Circle CEO Jeremy Allaire took to Twitter this morning (AEDT) in what he wrote was an attempt to “dispel the noise” and the FUD (fear, uncertainty and doubt).
In his thread, Allaire noted that FTX has been a customer of Circle payments for more than 18 months, providing card and ACH services for customer transactions, adding that Circle’s crypto payments beta product uses FTX and other exchanges for BTC/ETH liquidity.
Alameda Research, meanwhile, has been a Circle customer “for many years”, the CEO explained, using Circle’s USDC service for creating and redeeming the stablecoin. Alameda is FTX boss Sam Bankman-Fried’s trading and venture firm, and is at the centre of the FTT overexposure problem that contributed to the “liquidity crunch” and FTX bank run on user funds.
Allaire revealed, however, that Circle has never made loans to Bankman-Fried’s two companies and has never received FTX’s native token, FTT, as collateral, nor has it ever traded or held a position in FTT.
5/ Circle is a tiny equity holder of FTX, and FTX is a tiny equity holder of Circle. Circle is also a tiny equity holder of Kraken, Coinbase and BinanceUS.
— Jeremy Allaire (@jerallaire) November 9, 2022
7/ There is also FUD about Silvergate and risks for USDC. Silvergate is one of more than 10 banks that we work with globally. We hold a small portion of USDC cash reserves with Silvergate to support USDC settlement flows with their customers.
— Jeremy Allaire (@jerallaire) November 9, 2022
Out of the top two stablecoins, Tether’s USDT (market cap: US$68.5 billion) is the one that far more frequently comes under scrutiny and criticism for its supposed lack of transparency. Tether “FUD” has been flying around for literally years now.
Like Circle’s Allaire, Tether CTO Paolo Ardoino also jumped onto Twitter, where he’s a frequent poster, and clarified that the stablecoin issuer also does not have exposure to FTX or Alameda.
It’s true that Alameda has previously redeemed a lot of USDT, confirmed Ardoino, but he claims that “no credit exposure has matured”.
Alameda has issued and redeemed lot of USDt in the past.
But no credit exposure has been matured.
Tether is issued and redeemed upon market demand by our customers.— Paolo Ardoino 🍐 (@paoloardoino) November 9, 2022
For years, Tether has been subject to a ton of media FUD and regulatory maltreatment. If the rest of the industry was as transparent, diligent and professional as Tether, we wouldn’t have issues that we have today and earlier this year. Credit where credit is due.
— Gabor Gurbacs (@gaborgurbacs) November 8, 2022
I have to admit, I've been very critical of @Tether_to in the past, and their transparency is still not nearly what I think an asset-backed coin should have, but especially given what's happened to so many other big-money hotshots this bear, they've exceeded my expectations!
— vitalik.eth (@VitalikButerin) November 9, 2022
Ardoino is clearly sick of the speculation, as this following tweet suggests – which was in response to some more FUD and alleged hefty Alameda exposure, perpetuated in the odd corner of Crypto Twitter today.
Wow. Must suck to have a worse understanding of finance than an old lady running a cashier.
Some FAQs https://t.co/54zoCSRw3X pic.twitter.com/On9UpGHGg4— Paolo Ardoino 🍐 (@paoloardoino) November 10, 2022
In an update to this story, Tether has now published its latest quarterly attestation, emphasising the “extremely liquid” nature of its assets.
As of September 30 this year, 82% of Tether’s reserves were held in cash, cash equivalents and other short-term deposits, the company disclosed in its quarterly report.
Meanwhile, the stablecoin issuer reports that its exposure to commercial paper – short-term corporate debt – has fallen to only 0.07% of its holdings.
United States Treasury Bills now reportedly make up more than 58% of Tether’s reserves.