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Bitcoin

The World's Second-Largest Stablecoin Is Undergoing a Massive Change (cnbc.com) 68

Posted by BeauHD from the only-accepting-cash-and-bonds dept.
Digital currency company Circle says it's changing the makeup of its dollar-pegged stablecoin's reserves to just cash and U.S. Treasury bonds. CNBC reports: Digital currency company Circle had claimed its stablecoin, USD Coin, was backed 1:1 by actual dollars in a bank account. In July, it was revealed this was no longer the case, with Circle disclosing in an "attestation" from auditors Grant Thornton that cash made up just over 60% of USD Coin's reserves. The other 40% was backed by various forms of debt securities and bonds. Now, Circle says it's changing the makeup of USD Coin's reserves once again, with just cash and U.S. Treasury bonds underpinning the stablecoin.

Centre, a consortium founded by Circle and crypto exchange Coinbase which developed the stablecoin, unveiled the change on Sunday. "Mindful of community sentiment, our commitment to trust and transparency, and an evolving regulatory landscape, Circle, with the support of Centre and Coinbase, has announced that it will now hold the USDC reserve entirely in cash and short duration US Treasuries," Centre said in a blog post. "These changes are being implemented expeditiously and will be reflected in future attestations by Grant Thornton."
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The World's Second-Largest Stablecoin Is Undergoing a Massive Change More

The World's Second-Largest Stablecoin Is Undergoing a Massive Change

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  • Is the point of this?

    • Re:What exactly (Score:5, Informative)

      by phantomfive ( 622387 ) on Monday August 23, 2021 @08:54PM (#61723261) Journal

      The idea is to make money transfers easier, eliminating the bank as a middle man, and eliminating the volatility of Bitcoin.
      Of course, you could say, "Why not just use a bank transfer or Venmo?" But then presumably the bank transaction fee would be bigger than using the Stablecoin.

      I have no idea if it's practical or not but I have no need for it.

      • Re: (Score:2, Insightful)

        by Train0987 ( 1059246 )

        The sole purpose of stablecoins is to facilitate money laundering. That need to "eliminate the bank as a middle man" is because banks will not deal with shady exchanges allowing anonymous, unregulated trading in violation of the laws in many countries.

        The article and summary don't really emphasize the real significance of Circle's announcement: they admit that they've been lying for years about USDC's backing, just like Tether. Now we know the top two stablecoins are counterfeit USD with no backing. A co

      • Of course, you could say, "Why not just use a bank transfer or Venmo?" But then presumably the bank transaction fee would be bigger than using the Stablecoin.

        Zelle transfers are free and are backed by banks, unlike PayPal's Venmo.

        For that matter, I don't recall ever paying any fee on any electronic bank funds transfer I've ever done.

        • Settlement time is the other benefit. With standard cash transfers, it's 1-3 business days(or more for ACH or wire transfers). With crypto, immediate settlement. The assets clear in seconds to minutes. People pay Venmo fees to have fast settlement if they elect to skip the free slowlane. Zelle transfers are limited to low amounts(bank dependent)

        • Zelle transfers require a bank account (on each side), are limited in size (varies by bank, maybe $2k/day), and are limited to the US. So you can't use it for international payments, such as sending remittances.

        • There are some bank customers who require to make international transfers from time to time. And this is far from free with traditional banks or fintechs.

        • Every time you use a credit card, you pay a fee. You don't pay it, though.

    • Re: (Score:2)

      by E-Rock ( 84950 )

      The point of USDC? As far as I can tell it's just a way to defer taxes on crypto. IMHO the exchanges support them because it helps to encourage active trading.

      ***Not tax or legal advice, just my take on what they're doing***

      You only pay taxes on profits when you convert your crypto to cash. So, if you're holding BTC and you think it's about to take a dump, you can trade into USDC instead of going to dollars. Because USDC is pegged to the dollar, you're just as safe as holding cash (if the coin is properly b

      • You donâ(TM)t know what u are talking about. Tax is payable whenever u sell or exchange a crypto. That means changing to USDC from another crypto is a taxable event.

        • Re: (Score:2)

          by E-Rock ( 84950 )

          Tax shenanigans are a hassle I don't need, but that's certainly the line I've been fed on why you'd use a stablecoin.

        • No, takes are payable when you buy and sell stuff - as in, for real money. The IRS doesn't if you convert your Bitcoin to USDC on some random exchange, but they sure do care if you try to cash out on the latter.

          • Nope, you are wrong. If I buy a stock for $1 and its value rises to $2, if I trade that stock for another stock worth $2 then it's a taxable event and I would owe capital gains tax on the $1 in gains. Barter transactions are taxable, otherwise Bill Gates would just trade his Microsoft stock for Berkshire stock and incur no taxes.

            • You owe capital gains even if you keep the original stock and it rises in value - and so you do if you own digital assets. That's not what i'm talking about here.

              By converting BTC to USDC/USDT or similar, you're effectively able to operate in something that looks like USD, but it is not - and since there's no hard currency exchange, it is not a taxable event.

            • Stocks are securities. Bitcoin is a commodity. They are taxed differently. Trading Bitcoin for stable coins is arguably more like trading Beanie Babies for Magic: the Gathering cards. You don't pay tax until you exit to fiat or similar.

      • Re:What exactly (Score:5, Informative)

        by clovis ( 4684 ) on Monday August 23, 2021 @11:03PM (#61723525)

        You only pay taxes on profits when you convert your crypto to cash.

        Uhhh, I don't think so.
        Here's what the IRS says.
        https://www.irs.gov/individual... [irs.gov]

        Q16. Will I recognize a gain or loss if I exchange my virtual currency for other property?
          A16. Yes. If you exchange virtual currency held as a capital asset for other property, including for goods or for another virtual currency, you will recognize a capital gain or loss. For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets.

        • Re: (Score:2)

          by E-Rock ( 84950 )

          Thanks, this is partly why I posted. I've heard this version quite a few times as to why to avoid US Dollars. It seemed inconsistent with how other things worked, but crypto is pretty weird.

      • Re: (Score:2)

        by nyet ( 19118 )

        Stablecoins facilitate bridges and DEx's without requiring a custodian.

        If you don't know what that means, you have no business posting here.

    • Re: (Score:2)

      by crgrace ( 220738 )

      The reason they are doing this is they used to lie and claim that all USDC was backed by cash or cash equivalents. Then it came out that they had been lying. Since they expect to be regulated soon, they are getting out in front and un-lying by doing what they had claimed to have been doing all long.

      Fully transparent (when caught).

      • Now they fessed up, what were these other non-cash things. My bet is capital to build/run the exchange, loans to directors and like interests (unsecured by mortgage of course). It also seems a lot of 'coiners' seem in self denial about tax implications. I also suspect that if this was used, say by some other born-again/phoenix OF operation, the feds could seize money, I would need to look what US Bonds did during the great depression to see if bonds are indeed bullet proof, especially is money laundering

    • USDT/USDC/BUSD are equivalent to poker chips.

      Lay your bets.

  • Is it what people convert their Horsecoins to? Is it somehow designed to be more stable than the Bitscoin? I hope cybercriminals will stick to loosecoins only.

  • I couldn't give 2 shits about this stuff and I'm tired of hearing about it.

    • don't click on it then.

    • Some of the people who run or own /. have gotten into Bitcoin and so you are going to hear about it here whether you want or not.
      Additionally, you are going to HFSP.

    • Re: (Score:2)

      by nyet ( 19118 )

      It used to be slashdot was a place for people who had a clue. Those days are long gone, apparently.

      • People who had a clue = people who to have failed to convert any of their USD shitcoins into BTC, and thereby so far have missed out on some of the most profound appreciation of purchasing power seen in known history?

        • Re: (Score:2)

          by nyet ( 19118 )

          Ignorance of new technology in general. /. commenters on crypto sound like NYT readers commenting on that Internet Thing in 1998

      • It used to be slashdot was a place for people who had a clue. Those days are long gone, apparently.

        The beauty of this line is that it could apply equally to people who post useless complaints or to people who think Bitcoin is useful as a currency.

    • I couldn't give 2 shits about this stuff and I'm tired of hearing about it.

      But you did give the single shit needed to post your comment?

  • And why they are necessary.

  • Peg it to the S&P 500 (Score:4, Interesting)

    by cowdung ( 702933 ) on Tuesday August 24, 2021 @12:14AM (#61723655)

    A more useful coin would be pegged to the S&P 500 (and backed by an index fund).

    You could do transactions, but ultimately store your money.

    The growth of stock combined with the liquidity of currency.

    • Re: (Score:3)

      by nyet ( 19118 )

      The point to a stable coin is that you could actually build an asset/derivative that does just this; but ideally you'd still want a way to trade in and out of your positions to/from others w/o needing a centralized custodial exchange.

      This is what USDT/USDC are for.

    • A more useful coin would be pegged to the S&P 500 (and backed by an index fund).

      That would make it useful for an investment. The problem with investments are, people tend to hold them for long periods of time.

      To make it useful as a currency it should be pegged to the Consumer Price Index. [wikipedia.org] That way it has consistent buying power, and a minimal incentive to hold it for long periods of time.

      The biggest (of many) problems with cryptocurrencies are that they don't have well defined purposes. They are trying to be both a currency and an investment at the same time. As a result, they

  • And, if people had two ounces of common sense, this should be already reflected on its market value. But apparently a blockchain USD is in so high demand that everyone is entirely happy with being sold something, and then told at which price to sell that same thing back.

    "Stablecoins" like USDC are a scam. USDT is even worse - last time i checked, the amount of USDT in circulation was something like 6x of Bitfinex's market cap valuation.

    • I once bought Bre-X stock and even got legitimately issued paper stock certificates. It was a 6 billion dollar scam. I thought I was going be set for life at 20, how can you go wrong when you purchase something for $0.17 and within a few months its already north if $1.00 then $2 etc etc... there is so many people now involved in this with many people believing 100% this solves issues. Honestly I see it as by far the largest investment fraud going. No fundamentals no intrinsic value and the errata lists
  • Bad money chases out good money. Bye bye cash, hello debt instruments.
  • Scary times when so many financially illiterate folks are now instantaneously investment gurus. That said the damn thing does have legs and continually fills coffers for many people. The ripple effects of a potential crash should be interesting. Hell a single event can make or break people. If I was stuck in Afganistan I rather have a bag of diamonds, gold or USD than my cold wallet or even access to my accounts on an exchange.

  • It is a much more simpler currency.
    8 Ningis for 1 Pu is a simple exchange rate, and being a base 8 currency it is coded much more easier.

  • If they feel like they have to name it "Stable", then it probably isn't stable at all, and they're trying too hard.
  • The problem with cryptocurrency is the Money illusion. [wikipedia.org] Everyone is so obsessed with how many US dollars it's worth, they never think about purchasing power. What can you buy with it?

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