Coinbase, the largest crypto exchange in the United States, had a long-standing advertisement on its platform for the second-largest USDC stablecoin. The ad promised that every dollar given to investors would be used to support USDC with $ 1 “in a bank account.” The Coinbase partnership proved successful for stablecoin as it managed to become the second largest stablecoin after USDT.
Circle, the issuer of USDC stablecoin released the first reserve review report in July, which found that only 61% of USDC’s outstanding offering is backed by cash or cash equivalents. cash against the promise of 100% US dollar support. The remaining offering is backed by commercial paper, corporate bonds and other assets, which are not of stable value and may fluctuate with market conditions. This could create problems for the crypto exchange if regulators decide to act against it.
“There is a material difference and a tremendous amount of evidence that something backed by dollars held in a bank account is different from something backed by things like US Treasuries or corporate paper.” said the Columbia Law School lecturer.
Coinbase went public in April of this year with a record valuation in its early days, however, the USDC publicity may come back to haunt it.
Coinbase could be the subject of a potential investigation for “unfair or deceptive acts or practices”.
Bloomberg report pointed out that the content of the Coinbase website describing USDC had changed after being contacted by the organization.
“From December 2018, the first recorded page available on the Internet Archive, until Monday when Bloomberg called, Coinbase on its website described USD Coin as dollar-backed“ held in a bank account. ”Help page more detail on the coin stated that it was “100% secured by a corresponding US dollar held in the issuer’s bank accounts.”
The USDC Circle issuer also revealed that it intends to become a digital bank in the United States. While the company has promised to make its reserves more transparent by promising to upload the reserve data to the channel. However, the latest discovery regarding USDC reserves could potentially cause issues for the stablecoin issuer and Coinbase.
As I shared a little over a week ago, we are expanding our transparency on USDC reserves. You can find the expanded table of reserve assets in our May attestation report: https://t.co/dYCFnnxG82
– Jérémy Allaire (@jerallaire) July 20, 2021
U.S. lawmakers have previously called for regulations in the stablecoins market, indicating that the lack of disclosure regarding their reserves is a major concern. Previously, the New York attorney general filed a lawsuit against Tether in 2018 for lying about USDT reservations, the case was settled this year with a multi-million dollar fine.
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