Coinbase recently removed its promise of the USDC being backed by the dollar from its website. This came as a shock to the entire crypto industry when the company revealed in an attestation report that only 61% of the total supply of the stable coin was backed by U.S. dollars. The company had been criticized for saying that every USDC token was backed by a dollar in a bank account.
A report from Bloomberg showed that the company had not kept its promise of the token being backed by the U.S. dollar, which was the major reason for the growth of the second largest stablecoin in the world. USDC is the world’s leading regulated stablecoin, currently with a market cap of \$28 billion.
Coinbase president, Emilie Choi explained that the company did a disservice by not explicitly clarifying the language on its website with regards to the backing of the stablecoin. Stating that they should have moved faster to update statements on their website. And the company took the blame for that.
Coinbase Clarify USDC Backed By Dollar And Government Treasuries
Emilie Choi clarified that the USDC tokens have always been backed by reserves. For every USDC token in circulation, holders can always redeem each token for US\$1. Choi also pointed out that starting September 2021, Coinbase would discontinue the changes of the investment portfolio for USDC reserves that had begun in May 2021.
1/ Quick update on USDC. Starting September 2021, USDC reserves will be held in cash and short-duration US government treasuries. This is the approach we want for USDC reserves. https://t.co/29liaGg2LA— Emilie Choi (@emiliemc) August 23, 2021
Centre and Circle, the digital payments company that partnered with Coinbase to create USDC, will both work to make sure that USDC tokens are backed by more conservative investment profiles going forward. “Circle reserves expanded beyond cash and cash equivalents in May 2021, and the company provided a more detailed breakdown of reserve composition in July, adding clarity and insight into the funds backing USDC,” Centre said in a blogpost.
So while the attestation reports for the past two months, June and July, will show a more diversified investment portfolio backing the tokens, the portfolio will revert to more a conservative profile from September.