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Circle Says USDC Reserve Backed Entirely in Cash and Short-Dated US Treasuries

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On May 13, Circle’s chief financial officer Jeremy Fox-Geen published a blog post called “How to Be Stable,” following the aftermath of Terra’s stablecoin implosion. Circle’s CFO explained that since usd coin’s inception, the stablecoin aims to be “the most transparent and trusted dollar digital currency.”

Terra’s Stablecoin De-Pegging Incident Has Cast a Spotlight on the Entire Stablecoin Economy

For a few years now, stablecoin assets have been a popular hedging vehicle among many participants within the cryptocurrency community. In more recent times, stablecoins are being loaned out in great numbers in order to gather interest and high yield returns. In the early days, stablecoins were centralized projects and these days there are a few decentralized and algorithmic stablecoin tokens among the giants.

Tether (USDT) and usd coin (USDC) are the two largest stablecoin projects in terms of market valuation. Both of them are centralized, which means the company guarantees the stablecoins are redeemable for the $1 parity by holding reserves that cover the funds in circulation. Even before Terra’s stablecoin de-pegging event, more confidence has been placed in the top two stablecoins because they are centralized.

 

Three days ago, Bitcoin.com News reported on the stablecoin shuffle after the recent editorial our newsdesk published, showing that for the first time in history, three stablecoins entered the crypto top ten. That is still the case today, except that terrausd (UST) has been knocked out of the top-ten largest crypto market caps and the stablecoin BUSD has replaced the token’s position. After the terrausd (UST) implosion, Circle Financial’s CEO Jeremy Allaire has been speaking to the press about what makes USDC different, and he believes there needs to be “more regulatory framework around stablecoins.”

Circle CEO Says Company Is Ramping Up Trust and Transparency Efforts, Firm Says ‘USDC Is Always Redeemable 1:1 for US Dollars’

On Friday, Allaire tweeted that Circle was “ramping up our efforts” when it comes to USDC “trust and transparency.” Allaire also shared a blog post written by the firm’s CFO Jeremy Fox-Geen, who gives a summary of what Allaire means about transparency. Fox-Geen’s blog post explains “USDC has always been backed by the equivalent value of U.S. dollar-denominated assets.” The CFO further notes that the funds are held by America’s leading financial institutions such as Bank of New York Mellon and Blackrock. The Circle executive’s report adds:

The USDC reserve is held entirely in cash and short-dated U.S. government obligations, consisting of U.S. Treasuries with maturities of 3 months or less.

Circle’s CFO detailed that the company has been publishing monthly attestations from the leading accounting firm Grant Thornton International. “The USDC reserve is worth at least as much as the number of USDC in circulation, providing reputable third-party assurance of this fact to the USDC ecosystem,” Fox-Geen summarized in the blog post. “USDC is always redeemable 1:1 for U.S. dollars,” the Circle executive adds. The blog post concludes that there are thousands of projects and entities that support and facilitate the exchange of USDC in 190 countries.

While Terra’s Algorithmic Stablecoin Shuddered, a Few Decentralized Fiat-Pegged Tokens Still Exist, Many Crypto Supporters Believe They Are Needed

Meanwhile, there are a few decentralized and algorithmic stablecoin assets that exist today like LUSD, DAI, FEI, MIM, USDV, and USDD. For instance, the Ethereum-based Makerdao project leverages an over-collateralization method to back the stablecoin DAI. Tron recently introduced an algorithmic stablecoin token called USDD, and a blockchain project called Vader has a native algorithmic stablecoin called USDV. Another stablecoin asset, dubbed magic internet money (MIM), is built on top of Avalanche (AVAX) and is issued by the decentralized lending platform Abracadabra.

Decentralized and algorithmic stablecoin proponents believe they are needed among the centralized heavyweights like USDT and USDC. Supporters of such assets think that centralized stablecoins are subject to the same failure, and others believe decentralized and algorithmic stablecoins trump centralized models because they cannot be frozen by the issuer. Despite these benefits, centralized stablecoins have ruled the roost and crypto users, at least for now, have more confidence in them.

What do you think about centralized stablecoins and Circle’s recent blog post about transparency and the token’s reserve backing? Let us know what you think about this subject in the comments section below.

Central Bank of Chile Studies Issuance of a Digital Currency

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Bank of Chile

The Central Bank of Chile revealed it is studying how to issue a national digital currency, the digital peso. The bank issued a report titled “Issuance of a Central Bank Digital Currency in Chile,” where it explores the possibility of the creation of a central bank digital currency (CBDC) in the future, the mechanism it might use, and how it will consult all sectors of the economy on this issue.

Central Bank of Chile Considers CBDC Issuance

More banks in Latam are considering the issuance of their own central bank digital currencies (CBDCs) to take advantage of the different opportunities they might present. The Central Bank of Chile has just issued a new report studying the opportunities and drawbacks that the issuance of a digital peso might bring. The report, titled “Issuance of a Central Bank Digital Currency in Chile,” also studies the different forms that such a currency might take.

The document, authored by the payments group of the bank, was “framed in a context of increasing digitization of payments, which has been driven by rapid technological progress and the incorporation of new instruments and players in the payment market.” In this sense, the report concluded that:

The issuance of a CBDC would enable the benefits associated with digital transformation to be enhanced, while mitigating some of its risks. In particular, a CBDC could contribute to the development of a more competitive, innovative, integrated, inclusive and resilient payment system.

The report also calls for further analysis of the cost-benefit balance of issuing such a currency.

More Studies Needed

While many central banks in the world are studying and investigating the issuance of digital currencies, not many have moved to the execution phase. The document calls for more analysis and studies in this regard, as there are virtually no standards or best practice guidelines about how to proceed with the construction of such a project.

Digitization of the currency could also cause unforeseen negative impacts on the national economy, so any implementation in the future would have to be “carefully analyzed.” However, the central bank considers that this is the time to face this task and start working on its technical capabilities, and advance in the development of projects directed to test different implementations of the currency.

The bank also stated it will keep consulting and maintaining an open dialogue with all the institutions in the economic area. Brazil and Mexico are other countries in Latam also working to establish their own CBDC.

What do you think about the report issued by the Central Bank of Chile? Tell us in the comments section below.

Goldman Sachs Offers Its First Bitcoin-Backed Loan: Report

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Goldman has reportedly offered its first ever lending facility backed by BTC as the Wall Street giant deepens its Bitcoin offerings.

Goldman Sachs has offered its first bitcoin-backed loan.

The arrangement, made popular over the past few years in the Bitcoin industry by newer companies, enables a bitcoin holder to obtain fiat money like U.S. dollars by putting up their BTC as collateral to the bank. If the price of bitcoin drops, the user may be required to increase their collateral, risking getting liquidated in case they fail to do so.

The Wall Street giant lent cash collateralized by bitcoin owned by the borrower for the first time, a spokeswoman for the bank told Bloomberg. The deal was interesting to Goldman because of its structure and 24-hour risk management, she told the publication in an email.

Bitcoin investors have commonly leveraged the setup to increase their holdings when the price of the digital currency dips. Based on the assumption that Bitcoin’s decade-long history of price appreciation will continue in the future, the user chooses to acquire more bitcoin with credit, without having to pay with their own cash.

The loan type is also popular in another use case: making purchases. With a bitcoin-backed loan, a bitcoin holder can pay for goods or services with cash – for example, to buy a house or pay medical bills – without needing to sell their bitcoin. Not only does the user keep their bitcoin stash (provided they pay out the loan when it matures) but they also don’t have to worry about tax implications from a BTC sale.

Bitcoin-backed loans have also become popular among bitcoin mining companies, which earn revenue in BTC but need to pay for their operating costs in U.S. dollars or other currencies. Historically, miners would sell part of their produced bitcoin to cover expenses, but over the past couple of years big players in the industry have grown fond of taking out cash loans with their bitcoin holdings.

Goldman’s entrance into the bitcoin-backed loan business represents a watershed moment for the industry in terms of liquidity, legitimacy and optionality available for consumers. Bloomberg did not report the details of the loan.

Report: Gas Giant Exxon Is Running a Gas-to-Bitcoin Mining Pilot Program in North Dakota

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Report: Gas Giant Exxon Is Running a Gas-to-Bitcoin Mining Pilot Program in North Dakota

Exxon Mobil Corporation is reportedly participating in a pilot program that leverages excess natural gas to power crypto mining machines, according to a recent report quoting people familiar with the matter. The report states that the oil giant is partnered with the firm Crusoe Energy Systems, and the pilot is purportedly taking place in North Dakota at the Bakken shale basin.

Unnamed Sources Say Exxon Is Piloting a Bitcoin Mining Operation in North Dakota Using Flare Gas

On March 24, Bloomberg author Naureen S Malik reported that the largest American oil and gas corporation Exxon Mobil (NYSE: XOM) is participating in piloting a bitcoin mining project with excess gas. Malik wrote that “people familiar with the matter” told Bloomberg that they could not be named because the information is not public. However, the people who asked to not be named said that currently, Exxon Mobil is working with Crusoe Energy Solutions in the state of North Dakota.

Crusoe Energy is a firm that provides oil and gas companies with a digital solution to natural gas flaring. Natural gas flaring takes place when an oil or gas firm processes oil from shale and the oil extraction process releases excess gas that is typically burned. Some oil firms have found ways to convert the flare gas into useful energy and Crusoe Energy helps gas companies use the flare gas to mine digital currencies like bitcoin (BTC).

Malik’s report says that Exxon Mobil’s pilot is taking place at an oil pad located near the Bakken shale basin. The people familiar with the matter further said the “bitcoin mining servers” used in the pilot program are operating on site. Moreover, the anonymous individuals told the Bloomberg reporter that Exxon Mobil is considering adding pilot programs that leverage flare gas to mine crypto in four different countries.

“Exxon, the largest U.S. oil producer, is considering similar pilots in Alaska, the Qua Iboe Terminal in Nigeria, Argentina’s Vaca Muerta shale field, Guyana and Germany, one of the people said,” Malik’s report notes. Although, Malik contacted Crusoe Energy about the story and the reporter said the company “declined to comment.” Crusoe Energy Solutions is based in Denver Colorado, and the company system is called “digital flare mitigation technology” or DFM.

Equinor Reportedly Operated in North Dakota With Crusoe Energy, Report Further Shows Conocophillips Sold Excess Flare Gas to Mining Operations by the Bakken Shale Basin

There have been other times where there’s speculation abound concerning large gas companies mining bitcoin and reports shining a light on specific companies. In August 2020, Arcane Research leaked a number of screenshots from the publicly traded energy firm, Equinor. According to the report, the Norwegian state-owned energy company Equinor was also working with Crusoe Energy Solutions. Reportedly, Equinor’s collaboration with Crusoe in North Dakota was focused on reducing flaring from oil operations via bitcoin mining.

In addition to Equinor and Exxon, reports in mid-February indicated that Conocophillips was allegedly “selling extra flare gas to bitcoin miners in North Dakota.” The CNBC report said that Conocophillips also was working on a pilot in the Bakken shale basin region. CNBC author MacKenzie Sigalos wrote that Conocophillips did not disclose “which bitcoin miner it sells to, nor how long the pilot project has been underway.” However, Sigalos did say in the report that oftentimes a company like Crusoe Energy is used by the gas company.

Crusoe Energy is not the only company offering gas-to-bitcoin solutions as the firms Upstream Data and EZ Blockchain provide gas-to-bitcoin services as well. Greenidge Generation also uses excess gas to mine bitcoins instead of wasting or burning the energy. EZ Blockchain detailed last year in May that the company was working with an oil and gas provider from Texas, Silver Energy. At the time, EZ Blockchain said that Silver Energy set up a mining system in Alberta, Canada month earlier in February 2021.

What do you think about the individuals that claim Exxon is piloting a gas-to-bitcoin operation in North Dakota? Let us know what you think about this subject in the comments section below.

US Inflation Could Be Worse Than Expected, Goldman Sachs Says — Atlanta Fed President Favors 25 BPS Rate Hike

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US Inflation Could Be Worse Than Expected, Goldman Sachs Says — Atlanta Fed President Favors 25 BPS Rate Hike

While the conflict in Ukraine is a hot topic, fears of rising inflation continue to haunt Americans residing in the country, as economists and analysts note U.S. inflation will likely remain high. Inflation is likely going to be worse than initially feared this year, Goldman Sachs explained in a report published on Sunday. Moreover, in terms of inflation coupled with the Ukraine invasion, an economics professor at American International College (AIC) stressed there’s “a perfect storm brewing.”

Goldman Sachs: ‘Strong Jobs Market and Rising Inflation Could Ignite a Moderate Wage-Price Spiral’

Inflation has been ghastly in 2022 and it may not get better this year, according to a new inflation report stemming from Goldman Sachs economists on Sunday. “The inflation picture has worsened this winter as we expected, and how much it will improve later this year is now in question,” the note from the financial institution explained. Goldman’s note to investors, follows the Consumer Price Index (CPI) report that showed inflation in the U.S. climbed at its fastest rate in 40 years since February 1982.

Goldman’s report on Sunday further disclosed that the financial institution thinks that inflation could rise higher if there’s a disruption to supply chains and energy producers over Ukraine’s conflict with Russia.

“The initial inflation surge might have lasted long enough and reached a high enough peak to raise inflation expectations in a way that feeds back to wage and price setting,” Goldman Sachs analysts said. The Goldman Sachs report further stressed that a strong jobs market coupled with rising inflation could “threaten to ignite a moderate wage-price spiral.”

AIC Economics Professor Says ‘We Got a Perfect Storm Brewing,’ Atlanta Fed President Raphael Bostic Favors a 25 BPS Move in March

Economists and analysts are looking at the U.S. Federal Reserve and are trying to guess what the central bank will do in March. AIC’s professor of economics John Rogers said things will depend on what the Fed decides to do in terms of inflation. “We got a perfect storm brewing,” Rogers told the news desk at wwlp.com. “Inflation is pretty strong at least through the end of the year. A lot of that is what the Federal Reserve is able to do and what happens with this crisis.” The professor continued:

It’s just the geopolitical instability. You’ve seen the stock market highly volatile in the last couple of weeks. Anyone with a 401k plan is probably nervous about. The other big area is energy, it’s a worldwide market and the price of oil goes up around the world, it’s going to affect us as well.

Meanwhile, the Federal Reserve hinted that the benchmark interest rate may increase “soon,” and Fed chair Jerome Powell hinted it would likely be in March. Gold bug and economist Peter Schiff said last week that it’s possible Ukraine’s conflict could make the Fed keep the benchmark interest rate down. “Perhaps, the Fed is relieved that Russia invaded Ukraine as now it has an excuse not to raise interest rates in March,” Schiff tweeted.

Speaking at a Harvard virtual event on Monday, Federal Reserve Bank of Atlanta president Raphael Bostic told the attendees he favors a hike of around 25 basis points. “I am still in favor of a 25 basis-point move at the March meeting,” Bostic told the group of Harvard University students that attended the virtual discussion.

What do you think about inflation worsening in the U.S.? Let us know what you think about the statements from Goldman Sachs, AIC’s professor of economics, and Raphael Bostic in the comments section below.