While Circle and Tether have been competing with one another for control of the stablecoin market for a while, things have lately heated up following a string of increasingly public disputes between the two companies.
Early this year, USDC had a de-peg, which led to Circle, which had billions stored in Silicon Valley Bank (SVB), failing as a result. The company’s reserve management in relation to the SVB failure, according to Tether’s chief technical officer Paolo Ardoino, was a “basic mistake in risk management.”
The New York Attorney General and the Commodity Futures Trading Commission (CFTC) have negotiated various agreements with Tether, which has previously faced criticism for its own reserve management. These have to do with concealed related party loans made in the wake of the loss of access to hundreds of millions of dollars held at an unauthorized money transmitter that was allegedly laundering money for Colombian cartels.
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Concerns about Circle’s SVB deposits, according to Circle’s chief strategy officer Dante Disparte, are “risk reduction to absurdity.”
According to reports, Coinbase was prepared to intervene to support USDC during its de-peg by providing a $3 billion line of credit to support the stablecoin. However, the government’s decision to protect SVB depositors meant that this line of credit was ultimately not required.
Disparte recently stated at the Federal Reserve Bank of Philadelphia Annual Fintech Conference that “one half” of the stablecoin industry is “counterfeiting the US dollar” and he attributed this to “US inaction on policy and regulation.” Tether is the only coin with more than half of the stablecoin market, thus it would seem that this claim is that Tether’s operations are specifically counterfeiting because its reserves are so vastly different from Circle’s.
Disparte has previously questioned whether or not it is acceptable for anyone to “be able to counterfeit US dollars using cryptographic methods.” This is a more direct question than his earlier statements.
For the past few years, Circle and Tether have competed for sway in the stablecoin market. In a same vein, both companies have expended money to sway the policy and regulation debate in the US.
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