Last month, the Department of Justice launched a probe into the Tether stablecoin. The stablecoin, which has been around since 2014, has become one of the most valuable and pervasive digital assets. As of today, Tether is the 4th-largest crypto by market cap and boasts some $62.6 billion in circulation — that figure has prompted concern among regulators, because Tether isn’t backed dollar-for-dollar by Bitfinex. 🤔
Unfortunately, regulators are getting a new bone to pick thanks to USD Coin, which is issued by a consortium of companies called Centre. Coinbase and Centre assured the public that, unlike Tether, USDC was backed dollar-for-dollar in “a bank account.” But USDC wasn’t. 😬
The consortium’s first disclosure of assets last month revealed that USDC assets were held in “commercial paper, corporate bonds, and other assets that could experience losses.” That might not seem like a big deal, but the issuers of USD Coin lied about the way they back their stablecoin, which is a slap in the face to many investors. Those assets are not like the liquid cash you have in a bank account.
That’d be a problem if billions in USDC were ever redeemed, as it would be hard to liquidate cash alternatives fast enough. But ultimately, a lie is a lie. And unfortunately, misleading investors is likely to catch regulatory attention. These are things to consider next time you swap your coins for USDC. 🚨