Let the stablecoin war begin! In a controversial move, leading American exchange Coinbase has urged its users to switch their Tether (USDT) to USD Coins (USDC).
In a blog post titled “Switch to the trusted and reputable digital dollar,” Coinbase writes that USDC is “one of the most trusted and reputable digital dollars, fully backed with high-quality reserves.”
To incentivize users, Coinbase has waived the trade fees for USDT/USDC all global retail customers.
In reference to the disastrous events of this year, the exchange states that stability and trust are of “utmost importance.” And fiat-backed stablecoins offer stability and confidence in times of increased volatility. It goes on to say:
However, the events of the past few weeks have put some stablecoins to the test and we’ve seen a flight to safety. We believe that USD Coin (USDC) is a trusted and reputable stablecoin,
Coinbase Follows Binance Into Stablecoin War
However, the decision by Coinbase should not be seen as a purely philanthropic one.
The U.S. exchange is following the lead of Binance, which introduced an auto-conversion feature from USDC to BUSD in September to bolster its own stablecoin. Since then, BUSD’s share of the stablecoin market has grown massively.
Coinbase, along with Circle, is the founder of the CENTRE consortium that launched USDC. Compared to Tether, the joint venture promotes its own stablecoin as “unique.”
The reasoning behind this is that USDC is backed 100% by cash and short-term U.S. Treasury bonds held in U.S.-regulated financial institutions. “It’s always redeemable 1:1 for U.S. dollars,” Coinbase claims.
In addition, Grant Thornton LLP, one of the largest U.S. accounting, tax and advisory firms, provides monthly confirmation of reserves.
Tether publishes quarterly audit reports and is posting the results online on its website. According to the most recent audit, Tether tokens are fully backed by reserves, but unlike USDC.
Some 82.45% are cash, other short-term deposits and commercial papers, 9.02% secured loans (none to affiliates), 4.69% corporate bonds, funds and precious metals, and 3.85% other investments (including digital tokens).
The rumors and speculations about insufficient coverage of USDT are almost as old as the crypto market itself. In the past few years, Tether truthers have tried to prove that USDT is a scam.
However, so far Tether has survived every attack and every bear market. Remarkably, USDT is the oldest of all stablecoins.
Tether claims that there is a “coordinated” conspiracy against their company. Tether CTO Paolo Arduino has yet to personally comment on Coinbase’s decision.
On Twitter, he has only retweeted voices jumping on his side. Gabor Gurbacs, founder of the PointsVille app and strategy consultant at VanEck/MVIS wrote:
Tether was the first stablecoin in the world and has been trusted by millions around the world since its inception. In fact if you ask people outside a narrow group in the US they’d pick tether over USDC.
James Viggiano pointed out the merit of Tether in terms of the Bitcoin ecosystem.
— Paolo Ardoino 🍐 (@paoloardoino) December 9, 2022
At press time, the Bitcoin price seemed unfazed by the new USDT speculation initiated by Coinbase. BTC was trading at $17,200.