The cryptocurrency exchange indicated that USDC is a much more protected alternative in the wake of the FTX collapse saga. Moreover, it has exempted any cost on the conversion of USDT to USDC on its platform.
Stablecoins began as an onboarding instrument for the crypto exchanges in the early days of crypto, but they have become a critical market player and liquidity source. Nevertheless, there has always been some form of scrutiny around their reserves supporting these stablecoins. A stablecoin, by definition, must be 1 USD or equivalent.
The reserve debate intensified following FTX collapsed as many firms were disclosed to the tainted exchange. Moreover, its sister company Alameda Research went bankrupt. There was another allegation regarding Binance CEO Changepeng Zhao trading insults with former FTX CEO Sam Bankman-Fried and blaming him for trying to de-peg USDT.
Stablecoin War Emerging
Tether issued its latest quarterly attestation on November 10, just a day before the exchange filed for bankruptcy. The report stated that 82% of Tether’s reserves are in cash, cash equivalents, and different short-term deposits as of September 30, 2022.
Coinbase also highlighted that cash and short-dated U.S. treasuries kept in U.S.-regulated financial institutions support USDC 100%. It is consistently redeemable 1:1 for U.S. dollars.
Separated from the controversy regarding reserve audits, there is a growing stablecoin war among crypto exchanges. Coinbase’s proposal to convert USDT to USDC arrived just a couple of months after Binance, another global player. It cut support for USDC, leading to a reduction of $3 billion in the market cap of the Coinbase co-established stablecoin.
