The issuer of the No. 2 stablecoin USD Coin has said that it will reverse moves made in late July to build a "more diversified pool of investments."
Coinbase President Emilie Choi announced today that the No. 2 stablecoin will once again be backed entirely by U.S. dollars.
The cryptocurrency industry was surprised by the July 16 USD Coin attestation report, in which it revealed that only 61% of the funds providing the price stability of the USDC stablecoin was backed by “cash and cash equivalents.”
USD Coin is a joint project between Coinbase and Circle, which released the report..
That report covered the May reporting period, at which point there was $22.6 billion in USDC in circulation. The fast growing stablecoin is currently the Ninth-largest cryptocurrency by market capitalization, according to CoinMarketCap. There is currently $26.98 billion in USDC in circulation
Cash equivalents are low-risk but low-return assets like CDs, U.S. Treasury Bills, and corporate commercial paper.
"Could Have Been Clearer"
Noting that Circle has “previously said that every USDC is ‘backed by a dollar in a bank account,’” Choi admitted, “[o]ur language could have been clearer here.”
The May report covered the first time Circle had diversified its holdings into a broader range of investments, presumably in pursuit of a higher rate of return.
“[W]e should have moved faster to update statements like that on our website,” she said. “That was a mistake and Coinbase takes ownership for that.”
The investments will return to its previous makeup by the end of September, Choi added, noting that the June and July attestation reports will still include diversified investments when released, she warned.
“We're excited about the continued growth and adoption of USDC, which has become the largest regulated stablecoin in the world,” Choi said in a dig at No. 1 stablecoin Tether, which is based in the Cayman Islands.
Circle was the first company to earn a BitLicense from the New York Department of Financial Services — the toughest regulator of crypto around. Coinbase followed suit shortly, getting one in 2017.
Tether has been historically been opaque about the backing of its USDT stablecoin, only admitting that it was not 100% dollar-backed after an investigation by the New York Attorney General found that it had loaned its sister company Bitfinex some $700 million after the exchange was looted of $850 million.
Tether’s first audited attestation report was released on May 14, and showed that nearly a quarter of its reserves were held in non-cash equivalent investments. There is currently $62.8 billion worth of USDT in circulation.
