Isn't entire point of stablecoin that you can redeem it for the face value at any time? Not being able to redeem it seems like violating the contract or changing the rules while game is running...
>The wording on the Circle website changed from the previous "backed by US dollars" to "backed by fully reserved assets" by June 2021.
>USDC reserves are regularly attested (but not audited) by Grant Thornton, LLP
This is the same bullshit that Tether has repeatedly pulled.
An audit looks at the history of your overall financials, to ensure that you didn't just borrow that billion dollars two days ago for the sole purpose of passing the audit. Or that you didn't, like, cash a half-billion dollar check from yourself to yourself, and have the money immediately show up in the destination account, before it was debited from the source account.
I definitely feel like this is one of those situations where "if you have nothing to fear you have nothing to hide" actually applies.
I couldn't get a mortgage without a thorough check that income was indeed real income, the idea that billions in assets could be "attested" and not actually audited is incredibly shady.
https://www.centre.io/hubfs/PDF/2022%20Circle%20Examination%...
1) There are 51.39 billion USDC in circulation.
2) On a particular day (the Report Date) Circle held an amount of USD-denominated assets at least equal to the number of USDC in circulation in a segregated account.
Note what is absent: No statement as to what these assets are. No statement as to where they came from and whether they were in the account the day before or the day after the Report Date.
In the crypto world, where you can borrow a few billion dollars for a few seconds cheaply, that doesn't mean much.
Has anybody trusted the attestations, but verified (audited)?
Attestation: "Person X has $50 million dollars in an account."
Audit: "Person X has $50 million dollars in an account, and we know how it got there, who has claims on it, and whether it's fairly likely to still exist tomorrow."
As a concrete example:
https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen...
> On the morning of September 15, 2017, Tether opened an account at Noble Bank. Later that day, Bitfinex transferred $382,446,847.71 from Bitfinex’s account at Noble Bank into Tether’s account at Noble Bank. Friedman conducted its verification of Tether’s assets as of 8:00 p.m. EST.
https://ag.ny.gov/press-release/2021/attorney-general-james-...
> On November 1, 2018, Tether publicized another self-proclaimed ‘verification’ of its cash reserve; this time at Deltec Bank & Trust Ltd. of the Bahamas. The announcement linked to a letter dated November 1, 2018, which stated that tethers were fully backed by cash, at one dollar for every one tether. However, the very next day, on November 2, 2018, Tether began to transfer funds out of its account, ultimately moving hundreds of millions of dollars from Tether’s bank accounts to Bitfinex’s accounts. And so, as of November 2, 2018 — one day after their latest ‘verification’ — tethers were again no longer backed one-to-one by U.S. dollars in a Tether bank account.
An audit would've flagged this. An attestation does not.
It's like a kid who answers "are you eating cookies before dinner" with "no" because they stopped when you asked the question and are not currently eating one.
I admit I'm biased, I've used USDC personally & professionally, and I know people involved with running USDC. They're not evil geniuses. And even if they were, you could make so, so much money by breaking it ala Soros & the Bank of England, that I think it would've happened by now.
I could say my pencil is worth $52 billion and therefore I have the assets to cover $52 billion USDC and that would be the same as their 'transparency' reports which don't itemize a single asset, just an 'attestation' that the amount is covered.
But where would be the money in that?
But that won't be enough money for these people, of course
> None of the things called “real world currencies” meet today this very simple set of criteria.
—-
I dont own crypto but Im able to see the hypocrisy in our current global financial system.
We’re truly living like it’s 1929.
Tether freezes $150 million in USDT https://cointelegraph.com/news/tether-freezes-150-million-in...
Circle Confirms Freezing $100K in USDC at Law Enforcement's Request https://www.coindesk.com/markets/2020/07/08/circle-confirms-...
1. purely algorithmic stable coins (on-chain), such as UST. Voodoo, if you ask me. Can be decentralised.
2. (over)collateralised stable coins (on-chain), such as DAI (not DEI, which is at issue here). Collateralised by other crypto, smart contracts, and what have you. Can still be decentralised.
3. collateralised stable coins (off-chain), such as USDC or (allegedly) USDT. Those are collateralised by good old USD (or treasuries or commercial paper). Those need a central authority that holds on to the USD (or whatever form the collateral takes). So, makes sense that they have TOS.
The point of stablecoins is to have something that's the same value as a dollar, but which can interface with ("all the wonderful magic of") smartcontracts.
One way to achieve that is to have a big trusted organization honor redemption on demand. (GUSD and, I think but don't quote me, USDC.)
Another way is for an org to consistently honor enough redemptions (but not on an on-demand basis) that it trades at par (USDT, for now).
Another (dubious, increasingly unreliable) way is for some cryptocurrency to automatically buy the stablecoin when it falls below par (TerraUSD/UST with LUNA, already failed).[1]
Yet another is to issue the stablecoin only in return for a significant collateral buffer (with other cryptocurrencies) and force sellbacks when the collateral gets too close to critical (DAI and, I think, FEI, not to be confused with the DEI in this story).
[1] TerraUSD's platform had the Ponzi-esque Anchor paying 20% returns, but is stabilizing mechanism did not (attempt to) depend on this in any direct sense.
...which makes you wonder: why the cryptographic overhead at all? Oh wait... Because places want to be banks, without adhering to the regulations thereof...
"Fractional reserve."
Of course, some might call fractional reserve banking a scam as well but what these algorithmic stablecoins are doing isn't the same thing as the credit creation by private banks. It's more like they tried to create a "decentralized" central bank. I put that in quotations because the ones I know aren't actually decentralized either, they just use such buzzwords to trick traders.
Not all stablecoins work that way. There are more reputable ones like DAI or USDC. Actually the first stablecoins were all collateralized, the shananigans started in 2017 during the last bubble and now there are even more of these scammy projects because the market has grown so much. Adoption brings in a lot of newbies with money, and that in turn attracts charlatans of course. You can get a feel for what level of education the general public has when even in a tech forum most people don't understand anything about the economics and mechanisms of all these projects.
Obviously, as we've seen, algo stables are subject to their own engineered ponzinomics, but I don't think redemption is "the entire point", or even a cognizable concept.