Circle, a digital currency company, had claimed for a long time that USD Coin, its stablecoin was 1:1 backed by actual dollars in a bank accounts.
It was discovered that this was not the case. In July Circle disclosed in an "attestation” from auditors Grant Thornton, that cash made up only over 60% of USD Coin's reserve. The remaining 40% were backed by different forms of bonds and debt securities.
It is important to know what constitutes stablecoin's reserve. They are pegged to an existing currency, such as the U.S. Dollar or the Euro. This is what sets them apart from other cryptocurrency. This is done to avoid volatility that can be found in major cryptocurrency bitcoins.
Circle claims it is changing the composition of USD Coin's reserve reserves, this time with cash and U.S. Treasury bond underpinnings.
The stablecoin was developed by Centre, a consortium that Circle founded and Coinbase crypto exchange Coinbase created.
Circle announced in a blog that it would now keep the USDC reserve in cash and short-term US Treasuries, mindful of community sentiment and our commitment to trust, transparency and transparency.
"These changes have been implemented quickly and will be reflected on future attestations of Grant Thornton."
