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Stablecoin issuer Tether releases breakdown of its reserves

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The stablecoin issuer Tether released a report consisting of a breakdown of its reserves as of 31st of March 2021. This is the first of its kind since Tether’s launch in July 2014.

The pie chart below shows that the company held approximately 76% of its reserves in cash and cash equivalents and other short-term deposits and commercial paper.

Tether

With a share of 65.39%, commercial paper formed the major chunk of the stablecoin giant’s cash and cash equivalents cohort. Fiduciary deposits, on the other hand, accounted for 24.20% of the same category, while cash, reverse repo notes, treasury bills comprised 3.87%, 3.60%, and2.94% respectively.

The remainder of the platform’s reserves were split up across three groups. For instance, secured loans [none to affiliated entities] formed 12.55% of the total reserves while corporate bonds, funds, and precious metals collectively represented 10%. Moreover, other investments, including digital tokens, constituted 1.64%.

Reason Behind Tether’s First-ever Reserve Composition Release

The latest report essentially underscores the company’s efforts to remain in compliance with a settlement with the New York Attorney General [NYAG] whose probe ended in March. Tether and its sister company/cryptocurrency exchange Bitfinex had to pay an $18.5 million fine in addition to agreeing on the release of quarterly breakdowns of its reserves. In line with this, Tether stated,

“Today’s publication reflects our continued dedication to making this information public as part of our ongoing commitment to transparency and setting the standard in our industry. We embrace that commitment to our community.”

Earlier this month, its stablecoin [USDT] on-chain’s volume had climbed to a new milestone of a whopping $1 trillion for the first time ever. Despite several controversies and the emergence of several stablecoins over the past few years, Tether continued to dominate the realm. At the time of writing controls well over 60% of the market share of the total stablecoin transaction volume.

Here’s What MasterCard CEO Thinks Of Bitcoin, CBDC, and Stablecoins

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MasterCard CEO is all in for CBDC and stablecoins, but Bitcoin is still not in his good books.

It has been quite a ride for Bitcoin. From gaining notoriety for being the most volatile asset of recent times to the mainstream embrace, the world’s largest cryptocurrency has seen it all. Trading a little over a decade, Bitcoin has not only gained a massive fanbase but has also managed to flipped previous critics into its staunch supporters.

But this executive of a payment giant does not feel the same. In a recent interview with Fortune, MasterCard CEO Ajay Banga expressed his views on CBDCs, stablecoin as well as Bitcoin. His exact words were:

“Central bank digital currencies are really interesting. Stablecoins a little less so. Bitcoin, not really.”

Seems like not much has changed in the last couple of years. Banga has never been a fan of Bitcoin, the MasterCard exec has previously questioned its volatility. Despite his efforts to connect 1 billion people worldwide to the banking system, he had previously revealed that he does not see much usecase for cryptocurrencies such as Bitcoin in that push for greater financial inclusion.

MasterCard CEO Bullish On CBDC But Not Bitcoin

Citing Bitcoin’s volatility as the reason, MasterCard’s Banga had earlier questioned Bitcoin’s role in the world. While he is may not be a big fan of cryptocurrencies, the exec is, however, bullish on the growth of more stable cryptocurrencies especially by central banks which he believes could be an important milestone since it would be backed by each country’s existing currencies.

MasterCard CEO had opined,

“Fiat currencies, if they were to go digital, would they be helpful in cross-border trade flows and improving the efficiency of those – yes for sure.”

Back in 2018, the exec had termed cryptocurrencies as “junk”. But as Bitcoin and by extension the cryptocurrency slowly started becoming an important part of the payments world, MasterCard announced the supporting selected cryptocurrencies directly on its network.

USDC Goes Live On Stellar’s Decentralized Exchange

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The world’s leading stablecoin backed by Circle and Coinbase, USD Coin [USDC] went live on Stellar’s decentralized exchange, on the 2nd of February. David Puth, the CEO of Centre Consortium, asserted that the partnership of Stellar and Centre would further advance the growth of USDC while strengthening the Stellar ecosystem at the same time.

According to the official announcement, at launch, the Stellar USDC was available on Stellar’s decentralized exchange, accessible to any Stellar account through integrated wallets and tradeable across Stellar’s ecosystem of over 9,000 assets which includes stablecoins such as NGNT, BRLT, ARST, EURT, TZS and ZAR.

Notably, Stellar was previously announced as an official chain of the stablecoin back in October 2020 by Stellar Development Foundation [SDF] and the Centre Consortium, which was co-founded by Circle and Coinbase. ‍

Following the announcement, Denelle Dixon, CEO and Executive Director of the Stellar Development Foundation was quoted saying,

“This integration is going to be a powerhouse for growth in the Stellar ecosystem and a catalyst towards achieving our mission of creating equitable access to the global financial system. It presents significant business opportunities for both new and existing companies to build on the respective strengths of USDC and Stellar.”

Furthermore, the latest integration also aims to benefit businesses and developers from Circle’s scale and liquidity to deliver on the kinds of products and use cases the Stellar especially with respect to cross-border payments and tokenization.

Rise in Circulation of USDC Tokens

20210203 usd coin charts coinmarketcap

USDC was first developed on Ethereum blockchain but with the partnership, Stellar has become the fourth blockchain to support the stablecoin.

Besides, owing to the wider adoption of the cryptocurrency over the last couple of months, stablecoins in circulation have exploded at an astonishing rate. Moreover, the number of USDC tokens in circulation also saw a parabolic rise of more than ten-fold over the last 12 months. Most notably, the stablecoin gained momentum after July when prices of Bitcoin and altcoins picked up the pace.

At the time of writing, USDC’s market cap was found to be at $5.93 billion.

Bitcoin Is Still Super Bullish; Find Out Why

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After the cryptocurrency markets toned down, several on-chain metrics turned towards the bears. But this week has been relatively stable not just for Bitcoin but also for several altcoins. Alongside, the renewed positive, several metrics have aligned with the bulls.

According to the blockchain intelligence platform, Glassnode, more buying power has been observed that are gearing up to flow into Bitcoin and other crypto-assets. This was revealed by BTC’s Stablecoin Supply Ratio [SSR] which has been on a steady decline since the start of 2021 as more stablecoins are minted which indicated a large supply of stablecoins relative to BTC.

Glassnode 1

Glassnode describes SSR as a ratio of the total value of all Bitcoins vs. stablecoins. SSR often tumbles when the price of BTC is low or when more stablecoins are entering circulation. Furthermore, it is noteworthy that SSR is so low even as the crypto-asset maintains high prices demonstrates just how many new stablecoins have forayed the ecosystem in recent times.

To top that, many of these newly minted stablecoins are being deposited onto crypto exchanges, which further stood testament to the fact that they are highly liquid and ready to purchase assets such as BTC.

Expert Opinion: Willy Woo is highly bullish on Bitcoin. He went on to say that the market has completed “a full purge of overheatedness”. He added once selling begins, the selling pressure would create more sellers taking their profits while it’s still there. The popular statistician also asserted.

“Profit-taking has now completed. We can see this in the SOPR chart below. When SOPR touches the 1.0 line, coins moving between investors no longer carry profit.”

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Adding to the fever was Bitcoin transfer activity which climbed to a fresh ATH as the network reported an astonishing 22.3 million active BTC Addresses in the month of January this year.

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This coincided with Bitcoin trade volumes soaring to record levels in the same month as the crypto-asset surged past $30,000 for the first time ever and post subsequent ATH above $42,000 before entering a multi-week range-bound consolidation.

Bitcoin Aims For $40K Yet Again As Stablecoin Inflow Spikes

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Stablecoin influx into cryptocurrency exchanges has surged as Bitcoin’s price saw a relief rally and approached $40k.

As Bitcoin joined the bullish streak yet again, the run has opened new doors for the stablecoin bunch. The dollar-pegged or asset-backed-tokens have gained much wider adoption in recent times as their importance has gained prominence amidst the continued volatility in the market which brought about the need for lower volatility crypto-assets.

According to the crypto analytical platform, Santiment, these pegged crypto-assets have continued to have larger and larger ratios of tokens moving to several cryptocurrency exchanges. Tokens such as USDC, TUSD, and SAI have especially mirrored the proportion of its tokens moved to exchanges as Bitcoin’s price has surged.

santiment

Why now?

If the factors such as individual and institutional interest go, the case for a wider blockchain and crypto-asset adoption and investment is inevitable. Moreover, taking into consideration the growing and expanding ecosystem, the potential market participants and users have strongly sought to gain exposure to this area, at the same time, there is also a push for less volatile, and more sophisticated, crypto investment options which has further helped pegged tokens to surge in market cap.

What Does Stablecoin’s Resurgence Mean For Bitcoin?

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According to data from CryptoQuant, stablecoin deposits was first noted around the 13th of January when Bitcoin’s price saw a noticeable spike after trading in the red zone. Along with it, the cryptocurrency market also showed signs of recovery. Hence, the latest trend was indicative of significant buying pressure for Bitcoin as well as altcoins. This also meant that the investors bought the dip as depicted by the rising stablecoin inflow.

This is evident because traders tend to use stablecoins such as Tether [USDT] or USDC etc., rather than fiat since these are pegged to the value of fiat which makes it tradable across exchanges. The demand for stablecoins has increased magnificently over the past weeks. Leading the pack was USDT with a market cap of more than $24 billion as whales and high-net-worth investors jumped in to stack millions of dollars worth of Bitcoin.

Stablecoin Can Now Be Used For Bank Payments, Says US Treasury

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2021 has already been touted as the year for Bitcoin. But on a more positive note for the collective industry, in an interpretive letter, a federal banking regulator on Monday stated that the U.S. financial institutions are allowed to use stablecoins for payment activities, and can also participate as nodes in a blockchain.

According to the official release, the Office of the Comptroller of the Currency [OCC] which happens to be the US Treasury’s independent bureau, published a letter in which it clarified that the banks will be able to use stablecoins to execute transactions given that it conforms with the law and sound banking practices.

While acknowledging that if independent node verification networks [INVNs] and related stablecoins represent new technological means of performing bank-permissible payment activities., the interpretive letter issued by the OCC concluded,

“..that a bank may validate, store, and record payments transactions by serving as a node on an INVN. Likewise, a bank may use INVNs and related stablecoins to carry out other permissible payment activities. A bank must conduct these activities consistent with applicable law and safe and sound banking practices.”

The latest news comes nearly two weeks after top U.S. financial regulators reportedly warned firms behind the stablecoin market to tighten protections against money laundering.

Stablecoins have been mired in controversy ever since social media giant, Facebook’s Libra came into the picture.

Hence, the latest move was crucial to the ecosystem as aims to offer blockchain networks a level playing with traditional counterparts such as SWIFT, ACH, and FedWire. This step was further crucial because it can potentially the lobbyist group The Blockchain Association said in a tweet, calling it “a giant advance for crypto because it lay the foundation for these networks to be a formal part of the country’s financial infrastructure.

Jeremy Allaire, CEO of Circle went on to say that this was a huge win for the stablecoin sector. The exec also stated that this was a crucial step that could essentially set the stage for the use of leading dollar digital currencies such as USDC as a mainstream payment medium for all forms of payments and settlement. He went on to add,

“.. [The move] helps put the US in a leadership position in embracing the power of public blockchains. Beyond payments and settlement, and unlike legacy settlement mediums, public chains combine transactions and compute, enabling radically new modes of financial and commerce apps to be built.”

Stablecoin Platforms Asked To Bolster Money Laundering Processes

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Stablecoins were rolled out to steer away from the scrutiny imposed by the government following the volatile nature of cryptocurrencies. However, now even stable coins have made their way under the purview of the government. Social media giant, Facebook’s interest in rolling out a stablecoin undoubtedly stirred up some heat in the world. While regulators across the globe have been stressing on platforms to spruce up their money laundering processes, stable coins seem to be the latest interest of these regulators.

Stablecoins Could Pose Money Laundering Risks

The Treasury Department along with several other agencies in the United States suggested that platforms hoarding stablecoin services had to bolster their rules and regulations against money laundering. A recent press release titled, “President’s Working Group on Financial Markets Releases Statement on Key Regulatory and Supervisory Issues Relevant to Certain Stablecoins”, by the United States Department of the Treasury, suggested that these crypto-assets were to be operated in a “responsible” way.

While suggesting that the President’s Working Group on Financial Markets [PWG] viewed stablecoins as an efficient means of digital payment as it entails the potentials to “enhance efficiency, increase competition, lower costs, and foster broader financial inclusion” Despite this, the PWG suggested that stablecoins should be designed and administered in a more productive manner.

The PWG expects the assets to function efficiently without disrupting the stability of the monetary system in the country as well as internationally while managing risks associated with it.

The Deputy Secretary of the Treasury, Justin Muzinich elaborated on the same and stated,

“The statement reflects a commitment to both promote the important benefits of innovation and to achieve critical objectives related to national security and financial stability. Regulators will continue to look closely at stablecoin arrangements, and look forward to future dialogue on these issues.”

While the fate of Facebook’s Diem [Libra] is still uncertain, Tether, the largest stable coin, continues to surge in terms of market cap. The asset even took over XRP and now stands as the third-largest crypto asset with a market cap of $20 billion.

Binance’s Stablecoin hits a milestone of $500 Million Supply

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Stablecoin supply has now exceeded the whopping $200 billion mark. With this, the market noted more than 300% year-to-date rise for stablecoins. A sharp rise was first triggered by the significant decline in the price of cryptocurrencies following the Black Thursday market crash.

Interestingly, it is not just the big names such as Tether and USDC that saw a huge influx. Smaller and relatively newer stablecoins also considerable traction. In the latest development, Binance’s stablecoin BUSD was currently sitting at a market cap of $504 million. This was first observed by the Founder and CEO of the Malta-based crypto firm, CZ who tweeted,

https://twitter.com/cz_binance/status/1311514658914758656

Binance had partnered with Paxos Trust Company in September 2019 to launch a USD-denominated stablecoin, BUSD after receiving a green signal from the New York State Department of Financial Services [NYDFS].

skew main usdbacked stable coin contenders market cap usd

The rise of smaller cap stablecoins such as BUSD can also be directed to the increasing in user interest with DeFi. Generally, stablecoins are used by DeFi yield farmers to accept crypto stocks from various decentralized platforms such as Uniswap, Aave, and Curve which have been popping up in ever greater numbers this year. What has further added to the popularity is their offerings of larger and larger yields in the competition to attract locked funds.

Binance Chases DeFi

The cryptocurrency exchange has continued to grow its offerings in the DeFi space with new product launch almost every day. Hence, it is possible that BUSD may become a larger player in the stablecoin and the wider DeFi space which has largely been dominated by USDT.

Binance recently unveiled its new decentralized Binance Smart Chain which acts as a “bridge” between its DeFi and CeFi offerings. Since then the platform has continued to expand its footprint in the space. These developments were occasioned by huge BUSD inflows into Binance exchange over the past couple of weeks demonstrating a high potential buying power.

Binance’s Launchpool platform also provided a new venue allowing its users to farm assets such as BUSD. Additionally, first project on the platform was revealed to be Bella protocol where users will be able to stake their BNB, BUSD, and ARPA tokens.

ECB Calls For Change Of The ‘Misleading’ Term ‘Stablecoins’

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Europe seems to be taking a keen interest in digital assets, specifically stablecoins. While the European Union has completely dissed the issuance of stablecoins. The European Central Bank [ECB] called for a change in the tag “stablecoins” as it reportedly doesn’t fit its characteristics.

Europe Probes Stablecoins

Cryptocurrencies have been touted as extremely volatile assets. However, for those who feared volatility of this sort, stablecoins came as a silver lining. While several authorities have wholeheartedly welcomed stablecoins, these assets continue to reside on the negative purview of a few. The European Central Bank [ECB] seems to be the latest member of the list following the release of a 30-page report.

In its report, the ECB highlighted how the term stablecoin could be “misleading” as it is quite often comprehended to have optimistic undertones. However, the ECB went on to call out stablecoins’ ability to be intrinsic or prerogative as a form of money. Since these assets can only be procured through efficient risk management as well as appropriate design, they shouldn’t be called stablecoins, argued ECB.

The report further read,

“As regulatory principles are established and approaches are defined, the term “stablecoin” should be replaced by a choice of terminology to shift the emphasis away from the issuer’s promise of stability.”

Despite this, the ECB suggested that these assets had an upside as well, yet, the term stablecoins could put users in risk by manifesting vows of stability. The Central Bank further backed its statements through its report by elaborating on the characteristics of these assets. The ECB pointed out that the price volatility of stablecoins had followed the trail of cryptocurrencies and surged in the Q1 of 2020. The volatility of stablecoins once again decreased with the drop in the price volatility of cryptocurrencies.

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Furthermore, the ECB also highlighted how stablecoins are less likely to be perceived as a store of value asset as opposed to a payment method.

Additionally, several stablecoins were wary of their stance in Europe following the recent meeting between the Finance Ministers of the European Union. While many platforms have been prepping for the rollout of their native stablecoins, the Finance Ministers stressed on how the ECB was the only one allowed to issue currencies. However, the report restores some hope among them as the ECB highlighted that the Eurosystem was continuing to “monitor the evolution of stablecoins.”

Bank of England Governor Has Specific Plans for Emerging Stablecoin Market, Claims that the Industry Needs Overwatch

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Financial regulators across the planet have been doing everything in their power to bring cryptocurrencies and virtual assets under their mandate. Ever since the inception of Bitcoin and the altcoin industry, many traditional bodies have been convinced that the rules might need to be amended to accommodate the latest technology.

The latest traditional body to make a statement on the virtual assets industry was the Bank of England, which specifically stated that it needed to stay a step or two ahead of the emerging stablecoin market. This comment was made by the newly appointed BoE Governor Andrew Bailey who took charge of the post in March of this year.

The stablecoin market is still perceived as an emerging market despite the rise of major tokens like Tether. These tokens are linked with the US dollar which makes their prices much more ‘stable’ than the rest of the pack. Stablecoins shot into the limelight when Facebook announced its own called Libra coin. This disrupted the already controversial market with policymakers convinced that they had to do something about it.

Coming back to the Bank of England Governor, he claimed that the traditional market heads should ensure proper coverage of the cryptocurrency market. In his words:

“If stablecoins are to be widely used as a means of payment, they must have equivalent standards to those that are in place today for other forms of payment types and the forms of money transferred through them. If a sterling retail stablecoin wishes to operate at scale in the UK, then we will strongly consider the need for an entity to be incorporated in the UK.”

The United Kingdom has made some radical changes over the past couple of years to strengthen its financial ecosystem and protect it from anything that may hurt its integrity. Apart from this, the country has also asked the G20 nations to adopt stringent standards to watch over the cryptocurrency industry. This was a point reiterated by Andrew Bailey who claimed that existing regulatory standards must be examined and updated where necessary in light of stablecoins.