Tether’s recent print of $1 billion USDT drew attention against the backdrop of US federal agencies’ plan to press down on stablecoin issuers. Watchdogs’ major concerns involve the issuance backings that have been proven to be misleading in the past. After Tether, Circle issued $5 billion, which had no way but to come under scrutiny, crypto news portal CoinFi reported.
No knowledge of backing
Circle issued USDC equivalent to $5 billion this November without clarifying whether it’s collateral or cash-backed. Any amount issued in stablecoin needs backing by an equivalent in fiat, ideally the US dollar. At the same time, audit reports from Tether and Circle have shown only a fraction of the supply in circulation has cash or cash equivalent backing.
Case goes to Twitter
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Love it or hate it, Twitter is very influential when it comes to disseminating information about crypto and while not everyone on the social network is an expert, the opinions expressed there go viral. According to a user called Paul Everton, USDC is no longer legitimate.
He thinks the reason Circle hasn’t claimed it’s backed by cash is because it isn’t, plain and simple, adding that their willingness to back circulation supply with collateral puts them on par with hedge funds:
Skeptics told me that USDC isn’t legit. I thought it was shady but ok because Coinbase wouldn’t want to engage in such bad behavior. But looks like The Future of Finance™ is awfully like the past of finance. Do whatever you can get away with, pay fines when necessary.
Circle catching up with Tether
In the past, Tether dominated more than 95% of the stablecoin market. At the moment, Circle’s USDC is one of the faster-growing stablecoins with almost half of USDT’s circulation supply. USDT has been dominant on the spot market, while Circle’s stablecoin gathered momentum from the Defi market and may soon come to dominate the spot market as well.
Controversy benefits stablecoin issuers
The Federal Reserve and other prominent US regulators have asked Congress for more rights and permissions to regulate the stablecoin market. The controversy surrounding Tether and Circle is only adding to their appeal.
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