Robert Steinadler, 4 months ago
In the last couple of days many misconceptions about stablecoins were discussed in the media. The FUD was juicy and the story was told that Tether (USDT) and Circle (USDC) had exposure to FTX and could face serious consequences. None of this is true and while FTX is imploding, stablecoins are not affected.
It is true that Circle, the company behind USDC invested a non-substantial amount in FTX. They did the same with other companies like Kraken, just to name one example. What is even more important is that Circle wasn’t lending money to FTX or Alameda. There was no exposure to FTT either.
That being said, this is just a tiny amount of equity and will not impact any of the functions or services Circle provides with USDC.
Stablecoin providers offer the opportunity to mint or redeem stablecoin to businesses. Most of these businesses are exchanges or brokers. In order to mint USDC, a company needs to deposit the Dollar value of the transaction with Circle, which holds the Dollars in custody until the stablecoins are redeemed.
While there is an ounce of truth behind the claim that Circle had invested in FTX, Tether did not. Again, Tether’s job is to mint and redeem stablecoins like USDT in the similar fashion as Circle does. Since Tether is the market leader it is needless to say that the company minted and redeemed stablecoins for both Alameda and FTX on a regular basis.
Again, this does not create any exposure to the recent events or any liabilities. According to CTO Paolo Ardoino, Tether never lent any money to both companies and all transactions were settled accordingly.
But why is it so attractive to spread false rumors about the involvement of both Tether and Circle? The reason for the distrust dates back to 2020 when Tether lost a court case in New York. It was this case that revealed that Tether did not back USDT in a 1:1 ratio with US-Dollars. In fact, the company used also other assets in their balance sheet to assure a stable peg. Ever since the company provides transparency reports to clarify how USDT is backed. Circle does the same, but they hired a different law firm to create the reports. Over the last two years there were repeatedly false reports that both companies had some sort of issues.
Of course, we should all stick to Bitcoins credo: Don’t trust, verify! And that’s exactly what the reports are meant for.
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