Crypto, Circle USDC

July 16, 2022 | Crypto, Circle USDC

This year, stablecoins have gained some controversy. Liquidity is always crucial during a bad market, and stablecoins should help with that. However, trust is restricted now that a number of these tokens have completely lost their connection to their underlying fiat money. Circle is making an effort to address this and has increased its reserve transparency.

Stablecoin collateral made more clearly

The creator of USD Coin (USDC), the second-largest stablecoin today behind Tether's USDT, is Circle. Circle underlines in a blog post that this month is the first time it has disclosed its entire reserve.

As it has been publicizing the precise amount of reserves it has each month for the past year, it was already quite transparent about the assets it had to support USDC's value. It changed to using exclusively cash and US Treasury bonds last year. By doing this, Circle can keep the value of USDC from dropping below the value of its collateral.

Additionally, it clearly identifies the bonds it has bought with identifying numbers as well as the institutions that are in possession of the cash reserves. Dollar bank deposits at BNY Mellon, Customers Bank, and US Bancorp, among others, are used as the cash reserves. You will be fully aware of the risk associated with USDC should an asset encounter difficulties with one of these institutions.

And Circle is soon going to start regular updates for collateral information. It now occurs once a month.

USDC soon to be the largest stablecoin?

The largest stablecoin is quickly growing to be USDC. At this moment, USDT would be widely shorted. This is due to the fact that it is fully opaque regarding the stablecoin's reserves and has in the past even used extremely dangerous assets as collateral.

USDT also abruptly became unstable earlier this year with the collapse of the Terra ecosystem. That gives the sense that Tether is indeed experiencing some sort of issue. The Tether ecosystem is still expanding in the meantime. Therefore, Circle places the highest value on having a solid reputation and strong collateral. Since the crypto issues in early May, the market value of USDC has already increased by around 10%.

Sources:

- https://www.circle.com/blog/providing-greater-transparency

- USDC reserve assets,

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