Stablecoins are cryptocurrencies pegged at 1:1 ratio to a fiat currency like the dollar. As the name implies, this type of cryptocurrency is designed to bring some sort of stability to the crypto space; to facilitate payment settlements without losing the stability of fiat currencies like the U.S. dollar.
To maintain the price, however, issuers of stablecoins reserve an equivalent sum of fiat currency with a financial institution to back each stablecoin issued. Herein also lies concerns with fiat-pegged coins as users cannot easily verify if the coins are actually backed by fiat currency.
To allow for transparency, Circle Internet Financial, the issuers of Circle USD [USDC] employed the services of an independent auditing firm Grant Thornton LLP to look at its books.
Grant Thornton LLP, the U.S. branch of Grant Thornton International, in a recent attestation letter confirmed that Circle has reserved enough fiat money to cover for each unit of the USDC issued as at the end of last month.
The attestation read:
“As of the Report Date and Time, the issued and outstanding USDC tokens do not exceed the balance of the US Dollars held in custody accounts.”
According to the document, Circle had $127,412,240.89 held in custody accounts as of Oct. 31, 2018, slightly exceeding the 127,408,827 USDC tokens in circulation at the time. USDC which is jointly issued by Circle and Coinbase through the CENTRE Consortium has increased from a circulating supply of 127,961,109 in October to 163,000,512 currently according to data from CoinMartketCap.
Grant Thornton LLP explained that its examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. According to it, the standards require that they plan and perform the examination to obtain reasonable assurance about whether the Reserve Account Information in the accompanying Reserve Account Report is correctly stated.
Attestations from major Auditors is becoming a norm among stablecoin issuers in a bid to ensure transparency in an area that has become very competitive all of a sudden. Before now Tether USD used to be the only major stablecoin in the market but Tether which has experienced a myriad of challenges now faces competition from Circle, Gemini exchange, Paxos, etc all of who launched stablecoins this year.
As Smartereum reported, Gemini exchange issued Gemini USD [GUSD] which is backed by equivalent U.S. dollars stored in an FDIC-regulated bank under the regulation of the New York Department of Financial Services (NYDFS). Similarly, Paxos claimed that its PAX coin is backed by funds stored with an FDIC-insured bank.