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Coinbase removes ‘backed by US dollars’ claim for USDC stablecoin

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The stablecoin USD Coin (USDC), issued by Circle, has received a new characterization from the largest American crypto exchange Coinbase. This came after the audit of the stablecoin; which revealed that not all of the company’s reserves to bolster USDC held in cash. At the same time, it was previously believed that each stablecoin coin was backed by “one dollar” to ensure its value. In this regard, representatives of the cryptocurrency community thought about comparing USDC with USDT; which is the main competitor for the Circle project.

Recall that stablecoins called cryptocurrencies pegged to the value of the dollar, euro or other national currency. That is, 1 USDC or USDT can be exchanged for the corresponding volume of the dollar – and there is no doubt about it.

We checked the actual data: today, the total capitalization of the stablecoin market is $ 113.26 billion. The niche leader is still Tether USDT with $ 64.77 billion. The second place taken by USDC – it has 28 billion capitalization.

Now the distribution of forces between top projects may change. There was a small reason for this due to the audit.

What’s wrong with USDC?

Visitors to the Coinbase website can now see a new description of the stablecoin; which states that the project “fully backed by reserve assets”.

At the same time, earlier on the site it was written that USDC backed by dollars; which are in the company’s bank account. Naturally, the current description seems less attractive – especially for beginners who not used to this particular feature of the digital asset niche.

Securing a stablecoin is perhaps the most important characteristic of the entire project. It is thanks to the security that investors can be sure that the market value of coins will always be equal to 1 dollar; and in principle there will be no problems with the exchange rate. Stablecoins themselves are a bridge between the cryptocurrency market and the inflow of capital into it from conventional currencies; so the image of such altcoins means a lot to almost all market players.

Circle audited by Grant Horton. Its results showed that 61 percent of reserves to back up a stablecoin held in cash and cash equivalents, with 9 percent held in securities. These include certificates of deposit and US Treasury bonds; which “not fully backed by the US dollar held in bank accounts”.

The news didn’t cause a negative reaction from the market

Coinbase spokesman Andrew Schmitt commented on the incident with the following quote.

“Users can always exchange 1 USD Coin for 1 USD. We have added additional information to our website so that clients can learn more about the USDC reserves”.

So, in this case, the representatives of the cryptocurrency platform only wanted to notify their own customers about this feature of the crypto project. They had no goal of influencing the reputation of USDC – although some of the platform’s clients will certainly be upset about this publication. However, the situation with Tether USDT is exactly the same: the coin is also not fully cash backed.

In general, the news itself did not cause almost any negative reaction from the market. USDC continues to occupy an important place in the stablecoin ecosystem right after Tether – the most popular project in this sphere.

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