Stablecoin issuer Circle is making a notable adjustment to the composition of assets that back that USDC coin.
In a blog post published on Sunday, the company disclosed that the stablecoin would now be 100% backed by cash reserves and US Treasury Bonds.
The latest adjustment is telling because in July, an attestation by auditing firm Grant Thornton, in July, revealed that cash only made up roughly 60% of assets used to back the stablecoin.
The remaining 40% consisted of other low-risk debts and securities, even though Circle had always claimed the coin was backed 1:1 by the US dollar.
Following an industry consultation regarding the basket of assets, Circle has said it will make an adjustment that will see it “now hold the USDC reserve entirely in cash and short duration US Treasuries.”
The adjustments will be reflected in future USDC attestations and represent a move to satisfy its client base and also maintain a fine standing with regulators, the company said.
Cash-backing for stablecoins is especially important since users and investors get a tokenized version of USD by holding them. In the event that the asset isn’t sufficiently backed, a theoretical liquidity risk could arise if holders need to quickly redeem their tokens for real dollars.
USDC is currently the second-largest stablecoin, trailing industry leader Tether (USDt). While USDT boasts a $64.8 billion market cap, USDC stands at $27 billion.
Stablecoins have seen an increase in usage, thanks to integration with payment giants like Visa, and adoption with the decentralized finance (DeFi ecosystem).
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