A big change is underway for the world’s second-largest stablecoin. USD Coin (USDC), launched by Coinbase and Circle, will not be backed by US dollars only.
Coinbase president and chief operating officer Emilie Choi says all of the company’s USDC reserves will be backed by a combination of cash and short-duration U.S. Treasury bonds, starting next month.
The announcement comes after it emerged that not all USDC stablecoins were backed by US dollars held in a bank account. Business Insider reported that “Coinbase’s partner on the coin, Circle Internet Financial, disclosed that assets backing USD Coin include commercial paper and corporate bonds.”
Coinbase previously said on their website that “each USDC is backed by one US dollar, which is held in a bank account.”
The current disclosure now states,
“Each USDC is backed by one dollar or asset with equivalent fair value, which is held in accounts with US regulated financial institutions.”
In today’s announcement, Choi provides updates and clarifications on the reallocation of the assets backing USDC.
“Starting September 2021, USDC reserves will be held in cash and short-duration US government treasuries. When Circle shared their May report about USDC reserves in late July (which included a more diversified pool of investments for the first time) we should have moved faster to update statements like that on our website. That was a mistake and Coinbase takes ownership for that.
In any case, the changes in the investment portfolio for USDC reserves began in May 2021 and will not extend past September. Centre, alongside Circle, will ensure that the USDC investments revert back to a more conservative investment profile by the end of September.”
According to Bloomberg,
“The reserves were only in cash until March 2020, when the company added short-term U.S. Treasuries to accommodate the coin’s rapid growth, according to a Circle spokesperson, who said the coin’s disclosures also changed to reflect that. The coin’s reserves moved to a broader portfolio of investments in May 2021, the spokesperson said. By the end of September, the spokesperson said the reserves will be completely in cash and Treasuries with a term of less than 90 days.”
USDC has a current market cap of nearly $27 billion.
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