Coinbase is a cryptocurrency exchange based in the United States. asked Customers can convert their USDT (USDT stablecoin) Tether-issued USDT to USD Coin (USDC), which is a USD-pegged stablecoin created by Coinbase and issued by Circle in 2018.
According to the cryptocurrency exchange, USDC was a safer alternative after the FTX collapse. It also waived any fees for USDT conversions on its platform. The firm stated:
“We believe that USD Coin (USDC) is a trusted and reputable stablecoin, so we’re making it more frictionless to switch: starting today, we’re waiving fees for global retail customers to convert USDT to USDC.”
Stablecoins were initially created to be an onboarding tool for crypto exchanges during the early days of crypto. However, they are now a major market player and liquidity source. Stablecoin reserves supporting them have always been under scrutiny. Stablecoins must, by definition, be backed by at least 1 USD.
In the wake of the FTX collapse, the debate about reserve intensified as many firms that were exposed to the tainted stock exchange and its sister firm Alameda Research became bankrupt. Binance CEO Changepeng Zhao was also accused of trading barbs and trying to depeg USDT with former FTX CEO Sam Bankman Fried.
Post-strike FTX scoop – Just before the bankruptcy @cz_binance Accused @SBF_FTX They tried to lower the price of Tether. They had a chat group with other crypto executives and traded barbs. “The more damage you do now, the more jail time,” CZ said. https://t.co/OTlYgoEruJ
— David Yaffe-Bellany (@yaffebellany) December 9, 2022
Tether released its most recent quarterly attestation on November 10, one day before the exchange filed bankruptcy. The report noted that 82% of Tether’s reserves are held in cash, cash equivalents and other short-term deposits as of Sept. 30, 2022.
Coinbase also stressed that USDC is 100% backed by “cash and short-dated U.S. treasuries held in U.S. regulated financial institutions,” and it is always redeemable 1:1 for U.S. dollars.
Related: Circle founder says that USDC would benefit from Binance’s converged dollar books
Apart from the debate over reserve audits, there is a growing “stablecoin war” among crypto exchanges as well. Coinbase’s request to convert USDT to USDC comes just a couple of months after Binance, another global player, cut support for USDC leading to a drop of $3 billion in the market cap of the Coinbase co-founded stablecoin.
Tether-issued USDT is the largest stablecoin by market share with a market cap of $65 billion, USDC currently sits at a $42 billion market capitalization but has rapidly eaten into USDT’s market share. Binance’s stablecoin, BUSD, currently has a market cap of $22 billion.
Tether didn’t respond to Cointelegraph’s requests for comments at press time.