It has been a tough summer for the stablecoin industry, as the collapse of Terra’s algorithmic stablecoin, UST has alarmed the crypto community. As a result, consumers have called out other renowned stablecoin projects, like USDT and USD Coin (USDC) to be more transparent about their finances. In a recent development, the issuer of USDC, Circle, has revealed the details of USDC reserves in its monthly report. It was the company’s first monthly report on USDC reserves.
Circle continues enhancing our transparency and today we shared a detailed look at the assets backing the USDC reserve. https://t.co/1tuaFWZhIO
— Circle (@circlepay) July 14, 2022
Circle has revealed that the reserves comprise cash and 3-month US Treasuries. The report consists of data for assets in storage as of June 30. This report will help in restoring the faith of consumers. It proves that the stablecoin has enough reserves to back the asset. Also, it ensures the liquidity to return these assets in any case of emergency.
USDC Continues to Maintain Transparency
Any stablecoin that lacks backing can be pressurized by the withdrawal of investors. This can lead to a spiral effect and eventually, a collapse. Moreover, many consumers and investors can also face heavy losses due to this dilemma. A similar incident happened with Terra’s UST a few months back.
As per the report of Circle, its total reserves stand at $55.70 billion. These assets are divided into two parts. Treasury bonds account for $42.12 billion whereas $13.50 billion is in cash. The cash is invested in several financial organizations that are regulated by the United States. As per CoinMarketCap, the market cap of USDC is around $55.20 billion. Both of these figures match each other, showing that the asset is completely backed.
In addition to this, Circle has also focused on having a good relationship with US regulators. The Chief Financial Officer at Circle, Jeremy Fox-Green has said that Circle has gained monthly certifications from third-party accounting firms. Circle is also complying with all the audits that are needed by the regulators.
Nonetheless, Circle and Tether are collaborating with regulators to launch new stablecoins that focus on transparency. Also, these stablecoins will maintain pegging with traditional currencies, like Euro and Dollar. Circle has recently launched EUROC which is backed by the Euro, and Tether has launched a stablecoin backed by the Brazilian Real.
Previously, USDT also lost its pegging to the USD for a couple of days. The company, however, responded by telling that it is aiming to reduce its paper reserves to zero. Thus, the coin regained the trust of investors.