The American cryptocurrency exchange, Coinbase, has asked its clients to convert their Tether (USDT) holdings to USD Coin (USDC), a USD peg stablecoin issued by Circle and co-founded by Coinbase in 2018.
the exchange suggested that USDC is a much safer alternative after the saga of the FTX collapse and has also waived any commission on converting USDT to USDC on its platform. The company said:
“We believe that USD Coin (USDC) is a reputable and trusted stablecoin, so we are making it more frictionless to trade: Starting today, we are waiving fees for global retail clients to convert USDT to USDC “.
Stablecoins started as an onboarding tool for exchanges in the early days of the cryptocurrency market, but today they have become a key player in the market and a source of liquidity. However, there has always been some kind of oversight around the reserves that back these stablecoins. A stablecoin, by definition, must be backed by $1 or its equivalent.
The debate over reserves intensified after the collapse of FTX, as many companies with exposure to the exchange and its sister company Alameda Research ended up in bankruptcy. There was another allegation about Binance CEO Changpeng Zhao falling out with former FTX CEO Sam Bankman-Fried and accusing him of trying to break the USDT peg by short selling.
Just before the bankruptcy, @cz_binance accused @SBF_FTX of trying to drive down the price of Tether. They traded barbs in a group chat with other crypto execs. “The more damage you do now, the more jail time,” CZ said. https://t.co/OTlYgoEruJ
—David Yaffe-Bellany (@yaffebellany) December 9, 2022
Just before the bankruptcy, Chanpeng Zhao accused Sam Bankman-Fried of trying to lower the price of Tether. They traded insults in a group chat with other cryptocurrency executives. “The more damage you do now, the more time you’ll spend in jail,” CZ said.
Tether released its latest quarterly statement on Nov. 10, just one day before FTX filed for bankruptcy. The report stated that 82% of Tether’s reserves are held in cash, cash equivalents and other short-term deposits as of September 30, 2022.
Coinbase also stressed that USDC is backed 100% by “cash and short-term US Treasuries held at regulated US financial institutions”, and it is always convertible 1 to 1 for US dollars.
Aside from the debate over reserve audits, there is also a growing “stablecoin war” between exchanges. Coinbase’s request to convert USDT to USDC comes just a couple of months after Binance, another global player, cut its support for USDC, causing a $3 billion drop in market capitalization. of the stablecoin co-founded by Coinbase.
USDT, issued by Tether, is the largest stablecoin by market share, with a market capitalization of $65 billion. USDC currently has a market cap of $42 billion, but it has quickly eaten into USDT’s market share. Binance stablecoin BUSD currently has a market capitalization of $22 billion.
Tether did not respond to Cointelegraph’s requests for comment at press time.
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