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As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thort

As a comparison, USDC reserves are 100% backed by US dollars held in custody accounts, currently 9.3B. https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_circle_usdc_reserves20210429.pdf?hsLang=en https://www.centre.io/hubfs/pdfs/attestation/grant-thorton_c...

phire 5y ago
USDC's "custody accounts" aren't cash either: "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions and in approved investments on behalf of the USDC holders at the Report Date."
- Lionga 5y ago
  what defines an "approved investment" ?
  - csomar 5y ago
    > you agree Circle is free to use the funds provided for its own purposes prior to redemption subject to the terms of this Agreement. > Circle may also invest these fiat funds in highly-liquid, AAA-rated fixed income securities. I wrote about this here: https://omarabid.com/usd-stable-coins https://omarabid.com/usd-stable-coins Only Gemini USD is fully backed by US treasuries. Everyone else is using this money to play roulette.
    - nimchimpsky 5y ago
      dai ?
    - SilasX 5y ago
      Yes! And it redeems on demand! But what’s perplexed me is, the Gemini dollar (GUSD) is somehow more volatile than Dai, which uses much more complex, experimental means of stabilizing its value: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/gemini-dollar/ https://coinmarketcap.com/currencies/gemini-dollar/
      - csomar 5y ago
        That's economics for you! Your perception doesn't not much reality. The idea that because you can redeem at face value for 1:1 and you have stronger guarantees, then it should have a less volatile price. In reality, it comes down to market makers and market adoption/liquidity. That's why Tether could keep the beg at 1:1 despite having very little liquid cash. Liquidity will come from investors, and actually the more the better. Smaller fish like GUSD will not have that much interest from market makers.
        SilasX 5y ago
        It doesn't need interest from market makers. You want GUSD, you can buy it from Gemini at 1:1. You want to sell, they redeem at 1:1. You don't need market makers unless you want to get ripped off.
- ur-whale 5y ago
  Yeah, 100% agree. The notion of counter-party risk is understood by a tiny fraction of the folks who participate in finance.
  - makomk 5y ago
    At this kind of scale, I don't think there's such a thing as plain "cash" free of any counterparty risk - even just holding it in a bank account has risk attached (and most banks probably don't want an account with that much money in it because that would pose risks to them - they have the exact same problems finding somewhere to put it). US treasuries and AAA-rated bonds and commercial paper are about the best you can do.
    - H8crilA 5y ago
      Short dated treasuries are practically indistinguishable from "cash". They're counted together on corporate balance sheets. Also, what do you mean "cash"? Printed bills? Deposits in commercial banks' checking accounts? Would savings accounts count too (they can be frozen for some amount of days)? Deposits in Fed accounts?
      - ur-whale 5y ago
        You're right. These days, the word "cash" is basically meaningless for anything bigger than buying a bagful of groceries at the store. And it's not going to get any better. What sad times we live in.
        H8crilA 5y ago
        Nothing has changed for many decades, actually. For much longer than I'm alive, for instance. There's nothing new in money classification, currently.
    - lordalch 5y ago
      I remember reading about some folks who wanted to open a bank that wouldn't make any loans, but rather just take store all their deposits as excess reserves at the federal reserve. They would take a few basis points for themselves, but offer their customers a way to have truly cash deposits that earned some interest with the absolute minimum amount of counter-party risk. The Federal Reserve didn't approve them to do that, because they were worried that it could "destabilize the financial system."
- woah 5y ago
  That sounds like a bank account. Are you criticizing USDC for not being as safe as paper dollars in a mattress?
  - airza 5y ago
    Bank accounts are insured against counterparty risk by the FDIC.
    - jukabo 5y ago
      Did you know that FDIC is only back by 2.5% cash.
beefield 5y ago
Out of curiosity, in the hypotethical future case where the custody accounts would start to "pay" negative interest, what would happen to USDC? To me, there are only a limited set of options: 1. the peg fails 2. the custody accounts are switched to riskier assets - with or without knowledge of USDC holders. This, of course, has implications to the "stablecoin" status. One could even argue that USDC becomes a de facto fractional reserve bank at this point.
- meltedcapacitor 5y ago
  If they redeem tokens net of negative interest, it may not be pegged at 1.000 (as the cumulative negative interest is then rolled into the price of token) but it would still behave the same as competing forms of "electronic USD deposits", so one could argue the peg is not broken.
- vukk 5y ago
  You can check how EURS deals with this, for better or worse https://eurs.stasis.net/transparency/ https://eurs.stasis.net/transparency/
- dan-robertson 5y ago
  What would happen if the bank accounts paid interest and the trust wanted to share some of that interest with holders? I think the answer would either be some complicated stock-split-like mechanism, or just have, say, USDC-fixed as the “true” coin and USDC quoted at a floating value to the former such that e.g. 1 USDC-fixed = 1.01 USDC, and creations/redemptions of USDC-fixed happen at $1.01 to capture a compounded interest of 1%
ur-whale 5y ago
One very interesting sentence in that document is the "100'000 USDC token blacklisted" If you ever thought govt-backed cryptos and centralized tokens like USDC were a good idea, ask yourself this: Could a stack of greenbacks ever be "blacklisted" (I mean, people have certainly tried with various "tricks")? One of the nice property of money as we've known it so far was fungibility. With govt-backed (e-dollar) and/or centralized cryptos (USDC), much like the woolly mammoth the whole notion will soon be extinct. Decentralized ZKP-powered coins FTW.
- mike_d 5y ago
  > Could a stack of greenbacks ever be "blacklisted" Yes. Bill counters at banks capture serial numbers and associate them with your account when you make a cash deposit. Each night the serials are sent to a MCP database where they are checked against a hotlist entered by law enforcement across the country. The bank won't reject the bills on the spot, but depositing too many of the wrong ones will earn you a visit.
  - ur-whale 5y ago
    True, but you can still spend them at the grocery store. Tracing cash bills is a complicated affair beyond a couple of transactional hops.
    - AbortedLaunch 5y ago
      The kidnapper/murderer Ferdi Elsas was found via bills spent at the grocery store.
- dragonwriter 5y ago
  > Could a stack of greenbacks ever be "blacklisted" Deposit a whole stack from a bank robbery and find out.
- cesarb 5y ago
  > Could a stack of greenbacks ever be "blacklisted"? Copying from an older comment of mine (https://news.ycombinator.com/item?id=26812598 https://news.ycombinator.com/item?id=26812598): I saw something like this happen when I was younger (this was pre-web, in the 80s or 90s, so I unfortunately haven't been able to find any online references to it): there was a big bank heist, and the stolen banknotes were new notes which hadn't been put into circulation yet. The ranges of their serial numbers were widely distributed by the press, and for instance cashiers at supermarkets were supposed to verify whether the serial numbers of the banknotes they received matched any of these ranges (since the banknotes hadn't been put into circulation, they were treated similar to counterfeit money: they officially didn't have any value). The country's currency has changed since then (it was the hyperinflation times), so that whole banknote series is no longer valid nowadays.
odnes 5y ago
What's weird is that a couple of weeks ago Coinbase launched trading in Tether on Coinbase Pro. You would think this exposes them to much risk. I've been scratching my head about why they did it.
- Forbo 5y ago
  I think Kraken added Tether recently as well. Just seems like a terrible idea all around.
wslh 5y ago
You missed the "USDC hasn't published audits since Jan 2021" https://amp.reddit.com/r/CryptoCurrency/comments/mycfm9/usdc_hasnt_published_audits_since_jan_2021/ https://amp.reddit.com/r/CryptoCurrency/comments/mycfm9/usdc... now February is the last report. They just reported February a few days ago.
- user-the-name 5y ago
  Those aren't audits, either, they are attestations, which are very different.

phire 5y ago

USDC's "custody accounts" aren't cash either: "US Dollars held in custody accounts are the total balances in accounts held by the Company at federally insured US depository institutions and in approved investments on behalf of the USDC holders at the Report Date."

Lionga 5y ago
what defines an "approved investment" ?
- csomar 5y ago
  > you agree Circle is free to use the funds provided for its own purposes prior to redemption subject to the terms of this Agreement. > Circle may also invest these fiat funds in highly-liquid, AAA-rated fixed income securities. I wrote about this here: https://omarabid.com/usd-stable-coins https://omarabid.com/usd-stable-coins Only Gemini USD is fully backed by US treasuries. Everyone else is using this money to play roulette.
  - nimchimpsky 5y ago
    dai ?
  - SilasX 5y ago
    Yes! And it redeems on demand! But what’s perplexed me is, the Gemini dollar (GUSD) is somehow more volatile than Dai, which uses much more complex, experimental means of stabilizing its value: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/gemini-dollar/ https://coinmarketcap.com/currencies/gemini-dollar/
    - csomar 5y ago
      That's economics for you! Your perception doesn't not much reality. The idea that because you can redeem at face value for 1:1 and you have stronger guarantees, then it should have a less volatile price. In reality, it comes down to market makers and market adoption/liquidity. That's why Tether could keep the beg at 1:1 despite having very little liquid cash. Liquidity will come from investors, and actually the more the better. Smaller fish like GUSD will not have that much interest from market makers.
      - SilasX 5y ago
        It doesn't need interest from market makers. You want GUSD, you can buy it from Gemini at 1:1. You want to sell, they redeem at 1:1. You don't need market makers unless you want to get ripped off.
ur-whale 5y ago
Yeah, 100% agree. The notion of counter-party risk is understood by a tiny fraction of the folks who participate in finance.
- makomk 5y ago
  At this kind of scale, I don't think there's such a thing as plain "cash" free of any counterparty risk - even just holding it in a bank account has risk attached (and most banks probably don't want an account with that much money in it because that would pose risks to them - they have the exact same problems finding somewhere to put it). US treasuries and AAA-rated bonds and commercial paper are about the best you can do.
  - H8crilA 5y ago
    Short dated treasuries are practically indistinguishable from "cash". They're counted together on corporate balance sheets. Also, what do you mean "cash"? Printed bills? Deposits in commercial banks' checking accounts? Would savings accounts count too (they can be frozen for some amount of days)? Deposits in Fed accounts?
    - ur-whale 5y ago
      You're right. These days, the word "cash" is basically meaningless for anything bigger than buying a bagful of groceries at the store. And it's not going to get any better. What sad times we live in.
      - H8crilA 5y ago
        Nothing has changed for many decades, actually. For much longer than I'm alive, for instance. There's nothing new in money classification, currently.
  - lordalch 5y ago
    I remember reading about some folks who wanted to open a bank that wouldn't make any loans, but rather just take store all their deposits as excess reserves at the federal reserve. They would take a few basis points for themselves, but offer their customers a way to have truly cash deposits that earned some interest with the absolute minimum amount of counter-party risk. The Federal Reserve didn't approve them to do that, because they were worried that it could "destabilize the financial system."
woah 5y ago
That sounds like a bank account. Are you criticizing USDC for not being as safe as paper dollars in a mattress?
- airza 5y ago
  Bank accounts are insured against counterparty risk by the FDIC.
  - jukabo 5y ago
    Did you know that FDIC is only back by 2.5% cash.

beefield 5y ago

Out of curiosity, in the hypotethical future case where the custody accounts would start to "pay" negative interest, what would happen to USDC? To me, there are only a limited set of options: 1. the peg fails 2. the custody accounts are switched to riskier assets - with or without knowledge of USDC holders. This, of course, has implications to the "stablecoin" status. One could even argue that USDC becomes a de facto fractional reserve bank at this point.

meltedcapacitor 5y ago
If they redeem tokens net of negative interest, it may not be pegged at 1.000 (as the cumulative negative interest is then rolled into the price of token) but it would still behave the same as competing forms of "electronic USD deposits", so one could argue the peg is not broken.
vukk 5y ago
You can check how EURS deals with this, for better or worse https://eurs.stasis.net/transparency/ https://eurs.stasis.net/transparency/
dan-robertson 5y ago
What would happen if the bank accounts paid interest and the trust wanted to share some of that interest with holders? I think the answer would either be some complicated stock-split-like mechanism, or just have, say, USDC-fixed as the “true” coin and USDC quoted at a floating value to the former such that e.g. 1 USDC-fixed = 1.01 USDC, and creations/redemptions of USDC-fixed happen at $1.01 to capture a compounded interest of 1%

ur-whale 5y ago

One very interesting sentence in that document is the "100'000 USDC token blacklisted" If you ever thought govt-backed cryptos and centralized tokens like USDC were a good idea, ask yourself this: Could a stack of greenbacks ever be "blacklisted" (I mean, people have certainly tried with various "tricks")? One of the nice property of money as we've known it so far was fungibility. With govt-backed (e-dollar) and/or centralized cryptos (USDC), much like the woolly mammoth the whole notion will soon be extinct. Decentralized ZKP-powered coins FTW.

mike_d 5y ago
> Could a stack of greenbacks ever be "blacklisted" Yes. Bill counters at banks capture serial numbers and associate them with your account when you make a cash deposit. Each night the serials are sent to a MCP database where they are checked against a hotlist entered by law enforcement across the country. The bank won't reject the bills on the spot, but depositing too many of the wrong ones will earn you a visit.
- ur-whale 5y ago
  True, but you can still spend them at the grocery store. Tracing cash bills is a complicated affair beyond a couple of transactional hops.
  - AbortedLaunch 5y ago
    The kidnapper/murderer Ferdi Elsas was found via bills spent at the grocery store.
dragonwriter 5y ago
> Could a stack of greenbacks ever be "blacklisted" Deposit a whole stack from a bank robbery and find out.
cesarb 5y ago
> Could a stack of greenbacks ever be "blacklisted"? Copying from an older comment of mine (https://news.ycombinator.com/item?id=26812598 https://news.ycombinator.com/item?id=26812598): I saw something like this happen when I was younger (this was pre-web, in the 80s or 90s, so I unfortunately haven't been able to find any online references to it): there was a big bank heist, and the stolen banknotes were new notes which hadn't been put into circulation yet. The ranges of their serial numbers were widely distributed by the press, and for instance cashiers at supermarkets were supposed to verify whether the serial numbers of the banknotes they received matched any of these ranges (since the banknotes hadn't been put into circulation, they were treated similar to counterfeit money: they officially didn't have any value). The country's currency has changed since then (it was the hyperinflation times), so that whole banknote series is no longer valid nowadays.

odnes 5y ago

What's weird is that a couple of weeks ago Coinbase launched trading in Tether on Coinbase Pro. You would think this exposes them to much risk. I've been scratching my head about why they did it.

Forbo 5y ago
I think Kraken added Tether recently as well. Just seems like a terrible idea all around.

wslh 5y ago

You missed the "USDC hasn't published audits since Jan 2021" https://amp.reddit.com/r/CryptoCurrency/comments/mycfm9/usdc_hasnt_published_audits_since_jan_2021/ https://amp.reddit.com/r/CryptoCurrency/comments/mycfm9/usdc... now February is the last report. They just reported February a few days ago.

user-the-name 5y ago
Those aren't audits, either, they are attestations, which are very different.