Circle mints 8.4 billion USDC amidst stable coin uncertainties

2022-05-24, 02:49

Circle, the parent company for stablecoin USDC, recently published a blog post revealing that they had redeemed 6.7B USDC and minted 8.4B new coins. This occurred within a 7-day time frame within which competitor Tether (USDT) and other stablecoins suffered depeggings amidst general market anxiety.

Also known as USD Coin, USDC came into existence in September 2018, about four months after Boston-based Circle announced the forthcoming launch. USD Coin is fully backed with reserve assets such as the dollar, to which it is pegged in a 1:1 ratio.

The network allows traders to swap the dollar for USDC tokens on crypto exchanges, thus minting new coins. Similarly, as users redeem their fiat by depositing USDC, the stablecoins are burned. This process is how the USD Coin maintains its dollar peg. Last year, Circle saw roughly 99.3 billion tokens minted and about 61.1 billion redeemed.

More Details of the Blog Post

The publication titled, How to Be Stable- USDC Transparency and Trust noted the network’s esteem for the values mentioned above. Since introducing their stablecoin project, one of Circle’s core aims has been to embody trust and transparency within the stablecoin and digital asset industry at large.

The virtual payments company expressed its intention to remain committed to providing clients with open, regular updates, thus encouraging trust and transparency. The release listed recent details surrounding the network and its stablecoin.

Tagging these as facts, Circle shared that USDC is fully backed and always has been with reserve assets equal to 1 dollar. These funds comprise cash, short-dated US government obligations, and US Treasuries with maturities of 3 months or under. They are all securely held by a handful of leading financial entities within the States which include; BlackRock and Bank of New York Mellon.

According to Circle’s testimony, a staggering 77.1% of USD’s reserve was composed of $39 billion worth of US Treasuries, while $11.6B in cash amounted to 22.9%, making for a 100% total of $50.6 billion. What this translates to is that at the time of the release, midday, May 13, 50.6B USDC tokens were in circulation in the crypto market.

Third-Party Oversight

Circle noted its annual audits, which encompass the USDC reserve. Regarding the reserve, the network, in conjunction with a top global accounting firm, has released attestations each month since the project began. These statements confirm that the circulating USDC tokens are all backed by the equivalent of the collateral assets.

Among the audits mentioned above, those from the past two years have been published as part of the payment company’s SEC filings. This comes as they venture to become publicly listed on the New York Stock Exchange.

Circle Reassures Investors

The tumultuous state of the market over the past few days likely made it necessary for Circle to allay any fears USDC users might harbor. The recent collapse of algorithmic stablecoin TerraUSD appears to have kicked off a depegging trend among other stablecoins. While a few have recovered somewhat, tensions are still high within the crypto space.

UST hit a record low of about 15 cents, triggering a massive sell-off and traders taking advantage of arbitrage opportunities. The stablecoin’s sister token LUNA was also affected, and as both assets continued their swift decline, the Terra ecosystem met its downfall. The widespread panic and confusion didn’t let other tokens escape unscathed.

Terra Labs’ dev team working with CEO Do Kwon has shared plans that are underway to mitigate the damage and restore the token to its dollar peg. One of the measures was burning $1.4 billion in tokens in the hopes that a decrease in the supply would jumpstart a price rise. However, with investors still mistrustful, the token has remained at the bottom level, trading at $0.1027 at writing.

Considering these events, Circle’s efforts to retain investors’ trust are understandable, although USD Coin has remained stable. Notably, this is not a new practice for the company; they do work to provide users with frequent and transparent updates as they claim. Let’s look at USDC’s better points and its place in the crypto industry.

Source: Coinmarketcap

How the USDC Stablecoin Adds Value to the Crypto Space

As Circle pointed out in its blog post, they have always upheld their redemption mechanism. With USDC, it is practically guaranteed that customers can instantly mint and redeem tokens in a 1:1 ratio. The network’s continued openness makes them a reliable and secure option within a volatile market.

The low risk of volatility and full backing make USDC a great choice of assets as a hedge against inflation. Investors can stabilize their portfolio during periods of wild fluctuation by holding a stablecoin like USDC. The token grants exposure to the US dollar and is compatible with at least five different blockchains.

In the report, Circle stated that thousands of projects across more than 190 countries run operations that facilitate the flow of USD Coin. Despite the unfavorable market sentiment, the stablecoin recorded a $10.5 billion 24-hour trading volume last Friday. As they continue promoting transparency, Circle aims to make weekly reports on minting and redemption available to users. This will eventually evolve into a daily affair, the firm claims. As things continue shaping up, it’s not a stretch to say Circle is here to stay.

Author: Gate.io Observer: M. Olatunji
*This article represents only the views of the observers and does not constitute any investment suggestions.
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