On May 13, Circle’s Chief Financial Officer Jeremy Fox-Jean published a blog post titled “How to Be Stable” after the stablecoin explosion of Terra. The CFO of Circle explained that the stablecoin aims to be “the most transparent and reliable dollar digital currency” since the inception of USD Coin.
Terra’s stablecoin de-pegging incident sheds a light on the entire stablecoin economy
For a few years now, stablecoin assets have been a popular hedging vehicle among many participants in the cryptocurrency community. In recent times, stablecoins are being lent in large numbers to collect interest and high yield returns. In the early days, stablecoins were centralized projects and these days there are few decentralized and algorithmic stablecoin tokens among the giants.
Tether (USDT) and USD Coin (USDC) are the two largest stablecoin projects in terms of market valuation. They are both centralized, meaning that the company guarantees that stablecoins can be redeemed for $1 parity, which covers the money in circulation. Even before the de-pegging event of Terra’s stablecoins, more trust is placed in the top two stablecoins because they are centralized.
Three days ago, Bitcoin.com News reported on a stablecoin reshuffle after our Newsdesk published a recent editorial showing that for the first time in history, three stablecoins entered the crypto top ten. The same is true today, except that Terraced (UST) has broken out of the top ten largest crypto market cap and the stablecoin BUSD has replaced the token’s status. After the Explosion of Terrain (UST), the CEO of Circle Financial Jeremy Allier Speaking to the press what makes USDC different, he believes there should be a “more regulatory framework around stablecoins”.
We are ramping up our efforts for trust and transparency with USDC, so stay tuned for more information, but here’s a new blog post to start @circlepay CFO Jeremy Fox-Jean, plus a thread breaking it down: https://t.co/SYNpwYxUif
— Jeremy Allaire (@jerallaire) 13 May 2022
Circle CEO says company is accelerating trust and transparency efforts, firm says ‘USDC is always 1:1 redeemable for US dollars’
On Friday, Allaire tweeted that Circle was “accelerating our efforts” when it comes to USDC “trust and transparency.” Allaire also shared a blog post written by the firm’s CFO Jeremy Fox-Jean, which summarizes what Allaire means about transparency. Fox-Gene’s blog post states “USDC has always been backed by a par value of US dollar-denominated assets.” The CFO further notes that the funds are held by major US financial institutions such as the Bank of New York Mellon and BlackRock. The Circle Executive’s report stated:
USDC reserves are held entirely in cash and short-term U.S. government obligations, including U.S. Treasuries with maturities of 3 months or less.
The CFO of Circle elaborated that the company is publishing monthly verifications from leading accounting firm Grant Thornton International. “USDC reserves equal the number of USDCs in circulation, providing the USDC ecosystem with respectful third-party assurance of that fact,” Fox-Gene summarized in the blog post. “USDC is always 1:1 redeemable for US dollars,” the Circle executive says. The blog post concludes that there are thousands of projects and institutions that support and facilitate USDC exchanges in 190 countries.
Yes, @DoveyWanWell, we’d like to see the cash held at the Fed eventually. https://t.co/MHTjjveveQ
— Jeremy Allaire (@jerallaire) 15 May 2022
While Terra’s algorithmic stablecoin falters, some decentralized fiat-pegged tokens still exist, with many crypto proponents believing they are needed.
At the same time, some decentralized and algorithmic stablecoin assets exist today such as LUSD, DAI, FEI, MIM, USDV and USDD. For example, the Ethereum-based MakerDAO project leverages a hyper-collateralized method to support the stablecoin DAI. Tron recently introduced an algorithmic stablecoin token called USDD, and a blockchain project called Vader has a native algorithmic stablecoin called USDV. Another stablecoin asset, called Magic Internet Money (MIM), is built on top of Avalanche (AVAX) and issued by the decentralized lending platform Abracadabra.
This is an important point!
LUSD is technically an algorithmic stablecoin.
Not all algorithmic stables are created equal.
We need to be careful in how we explain these concepts to guns that are trying to torture us. https://t.co/GHe3lH4bt1
— Chris Blake (@ChrisBlec) 15 May 2022
Supporters of decentralized and algorithmic stablecoins believe they are needed among centralized giants such as USDT and USDC. Proponents of such assets believe that centralized stablecoins are subject to the same failure, and others believe that decentralized and algorithmic stablecoins trump the centralized model because they are not deposited by the issuer. can be done. Despite these advantages, centralized stablecoins rule the roost and crypto users, at least for now, have more confidence in them.
What do you think about centralized stablecoins and Circle’s recent blog post about transparency and reserve support for tokens? Let us know what you think about this topic in the comment section below.
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