- Coinbase removed a promise from its website that helped a stablecoin amass $28 billion in assets, Bloomberg first reported.
- The promise that every USD Coin was backed by an actual US dollar turned out to be false.
- Coinbase's partner on the coin, Circle Internet Financial, disclosed that assets backing USD Coin include commercial paper and corporate bonds.
- Sign up here for our daily newsletter, 10 Things Before the Opening Bell.
Coinbase removed a promise from its website that helped a stablecoin amass $28 billion in assets, Bloomberg first reported on Wednesday.
USD Coin, operated by Circle Internet Financial and offered on Coinbase's platform, had claimed that every coin was backed by one US dollar that was "in a bank account." That promise helped boost confidence in the stablecoin, which trades at a set price and can be redeemed by users for fiat currency.
But according to a July disclosure by Circle, the assets backing up its USD Coin include commercial paper and corporate bonds, which could experience losses and are less liquid than US dollars. That could lead to trouble (and losses for its holders) in the event that customers tried to redeem the stable coin en masse.
When questioned by CNBC's Andrew Ross Sorkin on Wednesday, Coinbase CFO Alesia Haas said, "You can always redeem your USDC for one US dollar and so the spirit of the disclosure was that you can always get a dollar back for the USDC that you hold."
Haas added that USD Coin has excess reserves that "are posted to ensure that if there was a run-on USDC and every single person wanted to get their dollar back at the same time that Center provides assurance that we would have the right reserves than held in addition to investments that that would be able to be fulfilled for our customers."
Despite the assurance that USD Coin will in fact act as a stable coin amid a potential run on the coin or volatile financial markets, the disclosure change is likely to catch the eye of regulators.
The largest stable coin, Tether, settled a case with the US earlier this year alleging that it hadn't always backed up its coins. Since the case settlement, Tether says it doesn't operate in the US.
But Circle has ambitions to ultimately become a public company. The company said on Monday that it intends to become a full-service US federally chartered crypto bank.
Still, the $3.2 million profit Circle reported in the first quarter of the year tied to interest income from its USD Coin reserves was more than the company could have made if it was solely holding US dollars, according to Bloomberg.
Bloomberg