Circle has released a report proving that its USDC stablecoin is fully backed by physical dollars and US Treasuries.
After the collapse of the Terra ecosystem (which includes its native token LUNA and its UST algorithm co-stable), the crypto community started to become more cautious about stablecoins, spurring large projects like Tether’s USDT and Circle’s USD Coin (USDC) become more transparent about their finances.
On July 14, Circle Internet Financial released its first monthly report on the USDC reserve assets it holds in storage since June 30, 2022. The company revealed that USDC reserves are held only in cash and US Treasuries for 3 months. This is important as it proves that it has enough liquidity to return all assets within a short period of time in the event of a major panic attack or a negative event of any kind. which consciousness.
When a coin lacks proper support, pressure from customers trying to withdraw their funds and move to a more reliable asset can lead to a spiraling effect that leads to a crash. In addition, the lack of immediate liquidity can severely affect the investment strategies of the affected parties.
As reported by Circle’s, its total reserves are $55.7 billion, divided into two parts; one of $42.122 billion in Treasuries and the second of $13.5 billion in cash invested in U.S. regulated financial institutions.
Circle continues to enhance our transparency, and today we shared a detailed look at the assets that back the USDC reserve. https://t.co/1tuaFWZhIOCircle (@circlepay) July 14, 2022
This amount is on par with USDC market cap data released by Coinmarketcap. Circle also provides a complete list of USDC reserve custodians.
Circle emphasizes its good relationship with US regulators
Jeremy Fox-Geen, CFO at Circle, said in the company statement that since USDC launched in 2018, Circle has received monthly certifications from third-party accounting firms and leads market leader in terms of adequacy of reserves and their composition. In addition, Circle has ensured compliance with all audits required by regulatory authorities along with their recommendations.
“Circle’s audits are included in our public SEC filings available here. Testing and testimonials serve different purposes discussed in this blog, How to Build Trust. “
In this way, Circle and Tether continue to work their way through regulators to launch new stablecoins that maintain parity with other traditional currencies, as was the case with EUROC, the new stablecoin Circle’s is backed by the euro, and Tether’s new stablecoin is pegged to the Brazilian real.
Stablecoin projects are becoming more transparent
As mentioned above, stablecoin projects are becoming more transparent after getting rid of some tokens — algorithmic or not. The most prominent example is the UST that has literally dropped from 1 USD to less than 10 cents in a few days.
A similar event happened with USDT, which lost parity against the US dollar for a few days. Tether Limited, the company that manages Tether (USDT), said in mid-May that it was working to reduce its commercial paper holdings to $3.5 billion by the end of July. A very significant number. when looking at the end of 2021, the company has over $24 billion in its reserves.
Assured Opinion Once again reaffirms that Tether’s reserves are fully supported; Revealing a significant drop in commercial paper and an increase in US treasury bills https://t.co/8qVSQFQBeYTether (@Tether_to) May 19, 2022
In addition, the company announced that their goal is to reduce paper reserves to zero. All this has helped alleviate the anxiety of many investors, and the coin is starting to regain confidence and value. , back to the average threshold.