Coinbase, Circle Criticized for Policy Alteration Concerning Dollar-Pegged Stablecoin USDC
Bloomberg Criticizes Coinbase and Circle for USDC Stablecoin Policy Alteration
Most recently, Coinbase and Circle have faced criticism from the media company Bloomberg, as it drew attention to past and present statements mentioned on the website of the exchange.
Earlier, as reported, the official website of Coinbase stated that each USDC is backed by one US Dollar, which is held in a bank account.
Now, the website of the exchange has stretched that statement for the inclusion of cash equivalents.
The new statement reads:
“Each USDC token is backed by one dollar or asset with equivalent fair value and that those assets are held by U.S. financial institutions.”
The recent alteration in the statement is seemingly related to a disclosure made in the month of July in which, Circle, one of the partners of Coinbase revealed a breakdown of its USDC reserves. That document (July Disclosure) suggested that 61% of the backing of USDC was in cash and cash equivalents, with the remainder in certificates of deposits, US treasuries, various bonds, and commercial paper.
The Exchange is not Completely at Fault
In response to the criticism by Dan Burstein, the CCO of Paxos, Coinbase released a statement that USDC is backed by a list of sanctioned investments in which the USDC can be invested as allowed by state regulators.
Moreover, it should be noted that though Coinbase has clearly altered the statement on its website, it never promised a never-changing method of backing.
Cash equivalents are common as back in the month of March of the year 2019, it revoked the claim that its USDT stablecoin was backed by US Dollars and started to claim USDT was backed by other investments.