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Auditors reveal USDC backing as Jim Cramer sounds alarm over Tether’s mad money

July 21, 2021 Coin Telegraph

Grant Horton has conducted an audit on USDC’s reserves and Jim Cramer has questioned what's going on with Tether's commercial paper reserves.

Auditors working for Circle have disclosed the reserves backing the firm’s USDC stablecoin, while Mad Money’s Jim Cramer has questioned Tether’s lack of transparency with its USDT reserves.

Multi-national tax advisory firm Grant Horton conducted the audit, and a reserve attestation report was published on July 20 which showed that 61% of USDC’s reserves were held in cash and cash equivalents equating to $13.4 billion, as of May 28.

Circle’s total commercial paper accounts for 9% of its reserves, and the figures provide a stark contrast to Tether’s reserves, in which undisclosed commercial paper accounted for 49.5% of its total reserves — something that Cramer has been "sounding the alarm" about recently.

The Circle report defines cash as deposits at banks and Government Obligation Money Market Funds, while cash equivalents are defined as securities with an original maturity less than or equal to 90 days.

On May 28 there was 22,176,182,251 total USDC in circulation, with the total fair value of Circle’s U.S. dollar-denominated assets held in segregated accounts fully backing the supply of USDC according to the report.

Circle noted that it voluntarily disclosed its reserves as part of its transparency goals, with the firm revealing plans to go public via a special purpose acquisition company (SPAC) earlier this month.

‘Yankee CDs’ and US Treasures represented the next biggest share of assets backing the reserves at 13% and 12% each, with a combined total value of $5.6 billion.

Yankee CDs are defined as “USD denominated Certificates of Deposit issued in the US by branch(es) of Foreign Banking Organizations,” with a maximum maturity of 13 months, while the U.S treasuries have a maximum maturity of three years.

The total commercial paper allocations represent 9% worth $2 billion, corporate bonds account for 5% worth $1.1 billion, and municipal bonds and U.S. agencies comprise 0.2% worth $100 million.

Circle’s USDC reserve breakdown was published amid increased scrutiny on the stablecoin sector from the U.S. government, with United States Treasury Secretary Janet Yellen meeting with other financial regulators this week to discuss a regulatory framework for stablecoins.

Finally, as we march towards becoming a listed company, we will be filing quarterly audited financials and management disclosures that will be required as an SEC regulated public company, and will include USDC reserve composition disclosures similar to our attestations.
— Jeremy Allaire (@jerallaire) July 20, 2021

Circle CEO Jeremy Allaire emphasized in a July 20 blog post that the firm is committed to providing transparency of its operations and working within the traditional financial system:

“Core economic activities underpinning USDC are built inside the perimeter of the U.S. financial system, and not outside of it.”

Jim Cramer thinks Tether is Mad Money

Speaking during a July 20 interview with The Street, Jim Cramer, the host of CNBC’s Mad Money questioned Tether’s lack of transparency and is asking why the firm hasn’t disclosed what the large percentage of commercial paper backing USDT is.

Tether released a brief reserve breakdown on May 13 and did not mention any independent review conducted on behalf of the firm.

Tether’s reserve breakdown showed that as of March 31, three-quarters of its reserves were held in cash, cash equivalents, other short-term deposits, and commercial paper. Amongst that category, commercial paper accounted for 65.39%, with cash alone accounting for just 3.87%.

The firm is yet to reveal what comprises its commercial paper holdings, and Cramer has been sounding the alarm bells:

“I am concerned about Tether, and I'm not gonna stop sounding the alarm until I know what Tether has. They’ve got about $60 billion in commercial paper. Tether open up the kimono, what commercial paper do you own?”

“Why wouldn’t they tell us?” he added, as he questioned whether the SEC will step in to find out.

“There’s a belief that a lot of the commercial bank paper, is Chinese bank paper, why not put that to rest and tell us it isn't?” he said.

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Circle Publishes USDC Attestation, Reserve Report Reveals Segregated Accounts in USD-Denominated Assets

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Treasury secretary Yellen urges lawmakers to quickly introduce stablecoin guidelines

July 20, 2021 Coin Telegraph

Coin Telegraph

The President’s Working Group on Financial Markets expects to deliver regulatory recommendations for stablecoins in the coming months.

United States Treasury Secretary Janet Yellen has told financial regulators that the government must act quickly to establish a regulatory framework for stablecoins.

The comments came at Monday's meeting of the President's Working Group on Financial Markets. The group discussed the rapid growth of stablecoins, revealing plans to issue regulatory recommendations in the coming months, according to Reuters.

The group also deliberated on stablecoins as a means of payment, possible risks to end-users, and their broader impact on the U.S. financial system and national security.

In February, Yellen warned that the misuse of crypto assets has been a growing problem alongside cyber-attacks triggered by the global pandemic. At the time, she acknowledged the promise of these new technologies but also warned about her vision of the reality, stating “cryptocurrencies have been used to launder the profits of online drug traffickers; they’ve been a tool to finance terrorism.”

Co-founder and CEO of Circle, Jeremy Allaire, labeled the meeting as “very significant”, commenting that stablecoins are here to stay and likely to become key components of the global economic and financial system:

“It's extraordinary and positive that US financial policy leadership are taking this on right now. It's a sign of how far we've come and how fast this is all happening.”

1/14 VERY significant meeting today with Presidential Working Group meeting to discuss appropriate policy and supervision of private stablecoins. Lots to say about this, @SecYellen, @federalreserve , and @USOCC teams.
— Jeremy Allaire (@jerallaire) July 19, 2021

Stablecoin growth has been monumental this year as demand for decentralized finance has surged. Circle’s USDC has been the best performer so far this year with a 577% increase in circulating supply to record levels of 26.4 billion according to CoinGecko.

Speaking on stablecoins last week, Federal Reserve Chair Jerome Powell similarly emphasized the need to establish a robust regulatory framework for stable tokens.

“If they’re going to be a significant part of the payments universe, then we need an appropriate regulatory framework which, frankly, we don’t have,” he said.

As reported by Cointelegraph earlier this month, the world’s most popular stablecoin, Tether, remains under scrutiny. On June 25, President of the Federal Reserve Bank of Boston, Eric Rosengren, raised a cautionary flag regarding Tether’s basket of reserve assets.

When the total stablecoin supply topped $100 billion in May, it triggered alarm among financial regulators concerned about the sector’s lack of oversight, including the opacity surrounding how stable token issuers manage their reserves.

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Hop Protocol launches USDC bridge between Ethereum, Polygon, and xDai

July 13, 2021 Coin Telegraph

Arbitrum

Hop plans to roll out support for additional crypto assets and layer-two networks in the coming weeks.

Hop Protocol, a team working on interoperability within Ethereum’s layer-two ecosystem, has launched its Hop bridge for the first time.

A July 12 blog post notes the bridge has been launched with limited functionality, currently supporting “instant” USD Coin (USDC) transfers between the Ethereum mainnet, Polygon, and xDai Chain.

Hop plans to expand the number and assets it supports over “the next couple of weeks,” including crypto assets Ether, Matic, and Wrapped Bitcoin, stablecoins Dai and Tether, and forthcoming layer-two networks Optimism and Arbitrum.

We're proud to officially launch the Hop bridge starting with instant $USDC transfers between @ethereum, @0xPolygon and @xdaichain.

➡ https://t.co/z8K0uAa2xg pic.twitter.com/PVtCuG5nDb
— HopProtocol (@HopProtocol) July 12, 2021

The bridge locks up tokens that a user wishes to transfer between networks, issuing its own “hTokens” that can be quickly and cheaply transferred between layer-twos. The hTokens are destroyed on redemption.

Hop will also launch a StableSwap automated market maker on each supported network to facilitate exchange between hTokens and their underlying assets, with Hop offering liquidity providers a 0.04% cut of all fees earned on transactions.

The StableSwap deployment on Polygon will also offer a liquidity mining program for USDC liquidity providers with more than $180,000 worth of MATIC slated for distribution.

While layer-two networks have emerged as the dominant scaling solution for Ethereum, the ecosystem has lacked the infrastructure facilitating the fast movement of assets between respective layer-twos.

In March, Ethereum co-founder Vitalik Buterin revealed that sharding had been pushed behind the chain merge in the Eth2 roadmap amid the success of layer-twos, predicting that rollups will scale Ethereum by a factor of 100.

However, while Buterin had then predicted rollups would be launched within a few weeks, the Ethereum ecosystem still has not seen major rollups solutions launch to mainnet, with Optimism currently targeting July 26 for launch and Arbitrum yet to open up its guarded launch.