The reason most stablecoins have not taken off is that they have not been proven to be stable. Most of you already know of Tether’s reputation as the most successful and also the most controversial stablecoin, chiefly because it has never finished a full audit of its’ supposed cash reserves.
For the better part of 2018, as the stablecoin niche truly took off, rampant speculation did as well as to what coin might take Tether’s place and truly legitimize the idea of stablecoins. Still, as we headed into 2019, it appeared that no stablecoin would finish any sort of audit of its’ reserves any time soon.
Even so, any sort of audit takes a fair amount of time to complete and yesterday, Circle’s stablecoin team proved why doing so is important. Since the beginning of the USD Coin project, the company has promised consistent attestations from the auditing firm, Grant Thornton.
Back in November, they proved that their coins in circulation in October had been backed equally by US dollars. Now, according to Grant Thornton’s latest attestation, the same was true at the end of 2018, even in the midst of the considerable bear market. Before we go any further, it is important to make clear that a difference exists between an attestation and a full audit.
In an overarching sense, this is that audits aim to make clear that for example, a company’s accounting falls in line with global standards like Generally Accepted Accounting Principles. An attestation does not make any attempt to do this. What they both share in common is the fact that they provide an auditor’s opinion on whether certain statements that were made by a company about its’ finances are true.
Because this is the case, an attestation can also serve as considerable evidence that a stablecoin is backed by the cash reserves that its’ holding company says it has. According to a reaction piece to this announcement released today via CoinDesk, both Gemini and Paxos have also produced attestations recently, though they have considerably less cash reserves overall as compared to Circle. In other words, all of them have the cash they need to remain stable, but Circle has more cash in general, meaning that it could issue more stablecoins.
Perhaps as the year goes on, this will prove to be the undoing of other, less powerful and even, more controversial stablecoin teams.
By: BGN Editorial Staff