USDC Stablecoin Base Shifts Back to Cash
Posted by Colin Lambert. Last updated: August 24, 2021
Centre, a consortium that includes Circle and Coinbase, has announced that it will ensure all reserves backing the USDC stablecoin are in cash or short-term treasury bills by the end of September.
Although the stablecoin was initially backed by cash only, as its use expanded the reserves used to back it were broadened to include corporate bonds and commercial paper, both of which carry a risk of default.
The move comes in response to murmurings from US regulators over the reserves backing stablecoins, after it was also revealed that Tether, the largest stablecoin, is also backed by non-cash products with the subsequent risk of a run on those products if the stablecoin is sold heavily.
“As industry and government work together on the appropriate future supervisory standards, Circle is committed to maintaining or exceeding those standards, driving innovation, and building reliable, trusted, secure and compliant infrastructure for dollars on the internet,” says Jeremy Allaire, co-founder and CEO of Circle.
Dante Disparte, chief strategy officer and head of global policy at Circle, adds, “As regulators consider the implications of digital currencies growing from $100 billion to potentially supporting trillions in economic activity in the coming years, supervisory standards are a necessity. We welcome the conversation and opportunity to play a leading role in the advancement of commerce and economic activity on the internet.”