Circle: USDC Maintains 1:1 Peg with USD

In a recent report on the economic status of USDC, Circle reaffirmed that its stablecoin "always" maintains a 1:1 peg to USD.

The report opens by highlighting that Circle has redeemed $213 billion worth of USDC since its launch in 2018. This success is attributed to the careful management of USD collateral, with 80% held in short-term US Treasury securities—one of the most stable and liquid asset classes globally. The remaining 20% is held across eight different banks regulated by the US government.

Additionally, Circle is licensed as a Money Services Business (MSB) with the US Department of the Treasury, signifying that Circle complies with anti-money laundering (AML) regulations, counter-terrorism financing rules, and Know Your Customer (KYC) requirements.

Furthermore, the company asserts that users can be even more confident because reserve proof reports audited by Grant Thornton show that Circle holds "significantly more" USD than the circulating USDC.

Circle stated:

“We have created an efficient operational environment, managing risk through proactive and comprehensive measures of identification, assessment, mitigation, and control.”

Overall, 2022 was a challenging year for USDC, marked by numerous FUD (Fear, Uncertainty, Doubt) regarding solvency issues and accusations of censorship. The US sanctions on Tornado Cash were seen as a "first shot" in a broader attack on crypto, which also impacted Circle's reputation.

During this period, ShapeShift CEO Erik Voorhees recommended that MakerDAO users convert USDC to other stablecoins with higher censorship resistance. Additionally, widespread fallout from the collapses of Luna, 3AC, Babel, and Celsius fueled rumors that Circle might be on the brink of failure.

However, these rumors were quickly dispelled after the first reserve asset report for USDC was published in July 2022. Looking back at 2022, it is evident that Circle successfully upheld its promise to maintain the 1:1 peg of USDC to USD.