The collapse of Terra’s ecosystem, which included its native token LUNA as well as its algorithmic stablecoin UST, caused crypto communities to become more cautious about stablecoins. This led to large projects like Circle’s USD Coin ($USDC) and Tether’s USDT (USDT). They also wanted to be more transparent about the finances.
Circle Internet Financial published its first monthly report, July 14, on USDC reserve assets in storage as of June 30, 2022. The USDC reserve was only held in cash and U.S. Treasuries for three months. This proves that the company has sufficient liquidity to quickly return any assets in the event of a major panic attack, or other negative events.
A coin without proper backing can lead to a spiral effect and eventual collapse. Clients may try to pull their funds to move to safer assets. A lack of liquidity can also negatively impact investment strategies.
Circle’s report states that its total reserves amount to $55.7 billion. It is divided into two parts: $42.122 billion in Treasury Bonds and $13.5 billion cash in institutions regulated by USA.
Circle is continuing to improve our transparency. Today we shared a detailed view of the assets that back the USDC reserve. https://t.co/1tuaFWZhIO
— Circle (@circlepay), July 14, 2022
This amount is in line with the USDC marketcap data from Coinmarketcap. Circle also provided a complete listing of USDC reserve custodians.
Circle Recognizes Its Good Relationships with US Regulators
Jeremy Fox-Geen is the Chief Financial Officer of Circle. He stated in the company statement that Circle has received monthly certifications from market-leading and third-party accounting firms regarding the adequacy and composition of its reserves since USDC was launched in 2018. Circle also ensured compliance with all audits and recommendations made by regulators.
You can find here the audits of Circle contained in our public SEC filings. Attestations and audits serve different purposes, which are discussed in this blog, How to Build Trust.
Circle and Tether are continuing to work with regulators to launch stablecoins that maintain parity against other traditional currencies. This is the case for EUROC, Circle’s new stablecoin backed with the euro and Tether’s new stablecoin pegged at the Brazilian real.
Stablecoin Projects are becoming more transparent
Stablecoin projects, whether they are algorithmic or not, have become more transparent as a result of the de-pegging a number of tokens. The most notable example of this is UST, which dropped from 1 USD down to less than 10 Cents in a matter of days.
Similar events occurred with USDT. It lost its parity to the dollar for a few days. Tether Limited, which manages Tether (USDT), stated in May that it was working on reducing its commercial paper holdings to $3.5 billion by July. This is a significant amount, considering the company’s reserves of more than $24 trillion by 2021.
Assurance Opinion Once Again Re-affirms Tether’s Reserves Fully Backed; Reveals Significant Reductions in Commercial Paper and Increase in U.S. Treasury Bills https://t.co/8qVSQFQBeY
— Tether (@Tether_to), May 19, 2022
The company also announced its goal to reduce its paper reserves down to 0. This helped to reduce investor anxiety and the coin began to regain trust and value, returning back to its average threshold.
Marla Brooks – Financial Analysis
My name is Marla Brooks, and I am the mainstream behind the”observednews.com” for the powerful and most delicate insights into the latest activities in the financial analysis category. I started my journey as an independent financial consultant. I had approximately nine years of experience in this field. I am free soul so; my passion for exploring the world has taken me to the nations across the globe and given me the chance to report for a portion of the best news associations. Currently, I am a full-time editor as experienced in finance and started to use my abilities.