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On May 13, following the implosion of Terra’s stablecoin, Circle’s CFO Jeremy Fox-Geen published a blog post titled “How to Stay Stable.” Circle’s CFO explained that since the introduction of the dollar coin, the goal of the stablecoin is to be “the most transparent and trustworthy dollar digital currency.”
Terra’s stablecoin decoupling event becomes the focus of the entire stablecoin economy
Stablecoin assets have been a popular hedging tool for many players in the cryptocurrency community for several years. Recently, stablecoins have been lent out in large numbers for interest and high-yield returns. In the early days, stablecoins were centralized projects, and now there are some decentralized algorithmic stablecoins among giants.
Tether (USDT) and USD Coin (USDC) are the two largest stablecoin projects by market capitalization. They are all centralized, which means the company guarantees that stablecoins can be exchanged for parity at $1 by holding reserves that cover circulating funds. Even before Terra’s stablecoin decoupling event, there was more confidence in the first two stablecoins because they were centralized.
Three days ago, Bitcoin.com News reported on the stablecoin shuffle following a recent editorial on our news desk, showing that, for the first time in history, three stablecoins entered the cryptocurrency top 10. This is still the case today, except that terrausd (UST) was knocked out of the top 10 cryptocurrency market cap and the stablecoin BUSD took the coin’s place. CEO of Circle Financial after terrausd (UST) implodes Jeremy Allaire Having been telling the media what makes USDC different, he believes that “more regulatory frameworks around stablecoins are needed.”
We are working on strengthening trust and transparency with USDC, stay tuned for more information, but here’s a new blog post from @circlepay CFO Jeremy Fox-Geen, and a thread below that breaks it down: https://t.co/SYNpwYxUif
— Jeremy Allaire (@jerallaire) May 13, 2022
Circle CEO Says Company Is Increasing Trust and Transparency Efforts
On Friday, Allaire tweeted that Circle is “upping its efforts” when it comes to “trust and transparency” in USDC. Allaire also shared a blog post written by the company’s CFO, Jeremy Fox-Geen, who summed up what Allaire means about transparency. “USDC has always been backed by equivalent USD-denominated assets,” explained Fox-Geen’s blog post. The CFO further noted that the funds are held by leading U.S. financial institutions such as BNY Mellon and BlackRock. The report from Circle executives added:
USDC reserves are held entirely in cash and short-term U.S. government bonds, including U.S. Treasuries with maturities of 3 months or less.
Circle’s CFO detailed that the company has been releasing monthly attestations from leading accounting firm Grant Thornton International. “USDC reserves are worth at least as much as the amount of USDC in circulation, providing a reputable third-party assurance to the USDC ecosystem,” Fox-Geen concluded in a blog post. “USDC is always convertible 1:1 to U.S. dollars,” added the Circle executive. The blog post concludes that there are thousands of projects and entities supporting and facilitating USDC exchanges in 190 countries.
yes, @DoveyWan, we ultimately want to see the Fed hold cash. https://t.co/MHTjjveveQ
— Jeremy Allaire (@jerallaire) May 15, 2022
While Terra’s algorithmic stablecoins languish, there are still some decentralized fiat-pegged tokens that many crypto proponents see as necessary
Meanwhile, some decentralized and algorithmic stablecoin assets currently exist, such as LUSD, DAI, FEI, MIM, USDV, and USDD. For example, the Ethereum-based Makerdao project utilizes the overcollateralization method to back the stablecoin DAI. TRON recently launched an algorithmic stablecoin called USDD, and a blockchain project called Vader has a native algorithmic stablecoin called USDV. Another stablecoin asset called Magic Internet Currency (MIM) is built on Avalanche (AVAX) and issued by the decentralized lending platform Abracadabra.
This is an important point!
LUSD is technically an algorithmic stablecoin.
Not all algorithmic stability is created equal.
We need to be careful how we explain these concepts to new gunmen trying to bully us. https://t.co/GHe3lH4bt1
— Chris Blec (@ChrisBlec) May 15, 2022
Proponents of decentralized and algorithmic stablecoins believe they are needed among centralized heavyweights like USDT and USDC. Proponents of such assets argue that centralized stablecoins suffer the same failure, while others argue that decentralized and algorithmic stablecoins outperform centralized models because they cannot be frozen by issuers. Despite these benefits, centralized stablecoins have taken hold, and crypto users have more confidence in them, at least for now.
What do you think of centralized stablecoins and Circle’s recent blog post on transparency and token reserve support? Let us know what you think about this topic in the comments section below.
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