The reserves that back USDC include US dollars in cash, certificates of deposit, corporate bonds, and securities. The report indicates audited funds of around USD 22,200, less than the amount of USDC in circulation.
As in the case of Tether (USDT) in the past, the US dollar also does not fully back stablecoin USD Coin (USDC). That information appears in the most recent reserve report from Circle, the company the currency. They released it after an audit by a tax firm outside the company.
Tax advisory firm Grant Horton breaks down in the report the reserves that back USDC. They note that there are only about 61% of dollars in cash or equivalents between them. The remainder includes certificates of deposit, securities, debt obligations of companies and financial institutions, and bonds of companies and government agencies.
While US dollars deposited in banks do not fully support USDC, reserves do not fully cover the coins in circulation. The information that the tax firm audited indicates a total fund of around USD 22.2 billion. However, nearly 28 billion USDC is currently circulating.
While the reserve report relates to July, the supply of the stablecoin has increased since then. However, the reserves and the existing USDC on those dates also do not match.
Messari data show that there were already more than 25 billion USDC circulating in July. That is roughly USD 3 billion more than what Circle’s reserves back.
As with USDC, there has been criticism about the Tether Limited (USDT) stablecoin for the way they treat their reserves.
A few days ago, a breakdown of the reserves backing USDT revealed that almost half of them are in commercial paper and certificates of deposit.
Additionally, the auditors noted that Circle owns USD 6.28 billion in cash and bank deposits, representing 10% of the reserves. They also revealed that it has USD 1 billion in reverse repurchase notes, equivalent to 1.6% of the funds. Likewise, they said that USD 15.28 billion in US Treasury bills correspond to 24.3% of their reserves.
USDC and USDT Are Not Stablecoins, According to Paxos
Paxos, a rival to both USDC and USDT, referred to the reserves of those stablecoins in July. The company behind the stablecoin of the same name considers that neither of them is an actual stablecoin.
The Paxos coin issuing company said that stablecoins are not what they claim to be. They stated that those currencies do not accurately reflect the price of the US dollar.
The Chief Compliance Officer of the company Dan Burstein argued that no financial regulator comprehensively monitors USDC and Tether reserves.
Although Paxos has appreciated, the Circle and Tether Limited currencies dominate the market for stablecoins based on the US dollar. USDT has become the reference standard for trading cryptocurrencies for US dollars on exchanges.
According to CoinGecko, there are more than 50 types of stablecoins, having Tether at the top with a 57.7% dominance. It precedes USDC (23.6%), Binance USD (9.8%), DAI (4.7%), TerraUSD (1.7%), TrueUSD (1.4%), and Paxos Standard (0.8%).
By Willmen Blanco
