Circle proves USDC’s ‘solid’ reserve after UST failed

Following the failure of stablecoin UST under Terra’s management, Circle CFO Jeremy Fox-Geen issued a blog post titled “How to Stabilize” on May 13. CFO Circle stated that USDC stablecoin has aimed to be “the most transparent and trusted US dollar digital currency” since its beginning.

Stablecoins have been a popular form of hedging for many members of the crypto community for several years now. A substantial number of stablecoins have recently been lent out for high interest and profits. Stablecoins were initially primarily centralized initiatives, however, a number of decentralized and algorithmic stablecoin tokens are slowly gaining appeal among the titans.

In terms of market capitalization, USDT and USDC are the two largest stablecoin initiatives. Both are centralized, which means that the firm ensures that the stablecoin may be redeemed for the equivalent of $1 using reserves that sustain the coins in circulation. Even before UST lost its peg, trust in the top two stablecoins was higher due to their centralized nature.

Looking at the rankings by market capitalization, we can observe that three stablecoins have entered the top ten cryptocurrencies for the first time in history. After UST was removed from the rankings, stablecoin BUSD rapidly replaced it. Furthermore, Circle Financial CEO Jeremy Allaire highlighted what distinguishes USDC, and he feels that a “more regulatory framework for stablecoins” is required. Jeremy Allaire tweet:

On Friday, Allaire tweeted that Circle is “increasing efforts” when it comes to USDC’s “trust and transparency.” Allaire also shared a blog post written by the company’s CFO, Jeremy Fox-Geen, summarizing Allaire’s stance on transparency. Fox-Geen blog post explains:

“USDC is always backed by the equivalent of US dollar assets.”

According to the blog post, there are thousands of projects and organizations in 190 countries that support and facilitate the exchange of USDC.

Meanwhile, there are several decentralized and algorithmic stablecoins in the works today such as LUSD, DAI, FEI, MIM, USDV, and USDD. For example, the Ethereum-based MakerDAO project uses an over-collateralized approach to support the stablecoin DAI.

Tron recently introduced an algorithmic stablecoin token called USDD, and the Vader blockchain project has a native algorithmic stablecoin called USDV. Another stablecoin, called Magic Internet Money (MIM), is built on top of Avalanche and issued by decentralized lending platform Abracadabra.

Proponents of decentralized stablecoins and algorithms believe they are essential among centralized heavyweights like USDT and USDC. Proponents of such assets argue that centralized stablecoins suffer similar setbacks, and that decentralized, algorithmic stablecoins outperform centralized models because they cannot be frozen by issuers. Despite these benefits, centralized stablecoins have dominated the market, and crypto users have more confidence in them, at least for now.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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