On May 13, Circle’s chief financial officer Jeremy Fox-Geen published a blog post called “How to Be Stable,” following the aftermath of Terra’s stablecoin implosion. Circle’s CFO explained that since usd coin’s inception, the stablecoin aims to be “the most transparent and trusted dollar digital currency.”
Terra’s Stablecoin De-Pegging Incident Has Cast a Spotlight on the Entire Stablecoin Economy
Many participants in the cryptocurrency industry have used stablecoin assets as a hedging tool for a number of years. To attract high interest rates and to generate large yield returns, stablecoins can be loaned out in huge numbers. Stablecoins used to be centralized. Today, there is a handful of decentralized stablecoin tokens that are algorithmic and distributed among the greats.
Market valuations show that USDT and USDC are the biggest stablecoin projects. The company holds reserves sufficient to ensure that stablecoins will be redeemable for the $1 parity. Even before Terra’s stablecoin de-pegging event, more confidence has been placed in the top two stablecoins because they are centralized.
Bitcoin.com News published a report on the stablecoin shake-up three days ago. This was in response to a recent editorial by our newsdesk, which showed that, for the first ever time, there were three stablecoins among the top ten crypto coins. That is still the case today, except that terrausd (UST) has been knocked out of the top-ten largest crypto market caps and the stablecoin BUSD has replaced the token’s position. After the terrausd (UST) implosion, Circle Financial’s CEO Jeremy Allaire has been speaking to the press about what makes USDC different, and he believes there needs to be “more regulatory framework around stablecoins.”
USDC continues to improve trust and transparency. We will be posting more soon. @circlepay CFO Jeremy Fox-Geen, as well as a thread below breaking it down: https://t.co/SYNpwYxUif
— Jeremy Allaire (@jerallaire) May 13, 2022
Circle CEO Says Company Is Ramping Up Trust and Transparency Efforts, Firm Says ‘USDC Is Always Redeemable 1:1 for US Dollars’
On Friday, Allaire tweeted that Circle was “ramping up our efforts” when it comes to USDC “trust and transparency.” Allaire also shared a blog post written by the firm’s CFO Jeremy Fox-Geen, who gives a summary of what Allaire means about transparency. Fox-Geen’s blog post explains “USDC has always been backed by the equivalent value of U.S. dollar-denominated assets.” The CFO further notes that the funds are held by America’s leading financial institutions such as Bank of New York Mellon and Blackrock. The Circle executive’s report adds:
USDC reserves are entirely held in cash, as well as short-dated U.S. government obligation. These include U.S. Treasuries maturing within 3 months.
Circle’s CFO detailed that the company has been publishing monthly attestations from the leading accounting firm Grant Thornton International. “The USDC reserve is worth at least as much as the number of USDC in circulation, providing reputable third-party assurance of this fact to the USDC ecosystem,” Fox-Geen summarized in the blog post. “USDC is always redeemable 1:1 for U.S. dollars,” the Circle executive adds. This blog entry concludes that USDC can be exchanged in over 190 countries by thousands of entities and projects.
Yes, @DoveyWanHowever, cash should be kept at the Fed. https://t.co/MHTjjveveQ
— Jeremy Allaire (@jerallaire) May 15, 2022
While Terra’s Algorithmic Stablecoin Shuddered, a Few Decentralized Fiat-Pegged Tokens Still Exist, Many Crypto Supporters Believe They Are Needed
There are a few algorithmic and decentralized stablecoin assets like LUSD and DAI. For instance, the Ethereum-based Makerdao project leverages an over-collateralization method to back the stablecoin DAI. Tron introduced an algorithmic token for stablecoins called USDD recently, while Vader, a Blockchain project has its own stablecoin named USDV. A second stablecoin asset is magic internet money (MIM). It is constructed on top of Avalanche, (AVAX), and issued by Abracadabra.
It is important!
Technically, LUSD can be described as an algorithmic stablecoin.
All algorithmic stables may not be created equally.
It is important to explain the concepts clearly to those with guns, who want to terrorize us. https://t.co/GHe3lH4bt1
— Chris Blec (@ChrisBlec) May 15, 2022
They are believed to be needed by centralized heavyweights USDT or USDC. These assets are supported by those who believe that they can fail in the same way as centralized stablecoins. Others think decentralized and algorithmic stabilitycoins outweigh centralized models since they can’t be frozen. However, these advantages have been overlooked and crypto users still have confidence in centralized stablecoins.
What do you think about centralized stablecoins and Circle’s recent blog post about transparency and the token’s reserve backing? Please comment below to let us know your thoughts on this topic.
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