Category: Stablecoins

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Crypto News Stablecoins Terra TerraUSD

Luna Foundation Raises $1 Billion as BTC Reserve for Decentralised Stablecoin

The Luna Foundation Guard (LFG) was recently formed to support decentralisation, economic sovereignty, and growth of the Terra ecosystem. Now, in an unexpected turn, it has announced that it has successfully raised US$1 billion to acquire bitcoin to underpin its decentralised stablecoin, UST:

A Move to Restore ‘Peg Parity’

TerraUSD (UST) is a decentralised and algorithmic stablecoin of the Terra blockchain, pegged to the US Dollar. In contrast to centralised stablecoins such as Tether and USDC, algorithmic alternatives do not use collateral to maintain their price. Instead, they maintain their peg by relying on complex market incentives, which LFG describes as follows:

As an algorithmic stablecoin, USTā€™s peg is maintained by a series of open market operations, arbitrage incentives, and countercyclical levers within the Terra protocol to offset market forces pushing the UST peg above or below one USD. LUNA, Terraā€™s reserve, staking, and governance asset, retains an elastic supply to help neutralise directional market pressures impacting the peg.

LFG Foundation announcement

One of the common criticisms of algorithmic stablecoins is their reflexive nature during extreme volatility, where the arbitrage incentives to bring the peg back to parity can potentially deteriorate. With the LFG announcement, the bitcoin will serve to provide an additional avenue to maintain the stability of the peg in contractionary cycles that reduces the reflexivity of the system. As LFG noted:

The reserve assets can be utilised in instances where protracted market sell-offs deter buyers from restoring the UST pegā€™s parity and deteriorate the Terra protocolā€™s open market arbitrage incentives.

LFG Foundation announcement

LFG added that while initial plans were to acquire bitcoin, it would “expand to other major non-correlated assets within the market moving forward”.

Mixed Reactions, of Course

The announcement was met with both excitement and derision, a feature expected of noisy social media platforms such as Twitter:

Given the increased scrutiny on stablecoins in the US in particular, and the willingness of issuers to censor addresses on request, the demand for decentralised stablecoins is self-evident.

It remains, however, to be seen whether LFG’s strategy will foster greater trust in UST. Initial signs are positive, but it is probably too soon to tell.

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Crypto News Stablecoins Tether

Will Tether FUD End as ‘Assurance Opinion’ Reveals Assets Exceed Liabilities?

Despite its disclosing the composition of its reserves last year, some continue in the belief that Tether, the company behind USDT stablecoin, is built on a house of cards. Will its latest disclosure finally put an end to that discussion? If history is anything to go by, probably not.

Tether Has Not Always Been Keen to Open its Books

With a market capitalisation (market cap) just shy of US$80 billion, USDT remains around 50 percent larger than its closest rival, USDC, with a market cap of US$52.6 million.

Tether has historically been notoriously shy about disclosing its reserves, citing “harm to its competitive position”, and perhaps this is warranted, given that USDC’s supply is growing faster than USDT.

Notwithstanding, the general lack of transparency and willingness to disclose its reserves has seemingly perpetuated the view held by some, that Tether is a fraud and its “reserves” serve only to artificially prop up the broader crypto market.

Tether ‘Assurance Opinion’ Reveals Assets Exceed Liabilities

However, as per its latest disclosure, Tether has revealed that in fact its assets exceed its liabilities. The disclosure notes a 21 percent decrease in its commercial paper holdings over the prior quarter, and that the attestation, completed by MHA Cayman, affirms that as of December 31, 2021, Tether’s assets were broken down as follows:

  • consolidated total assets amount to at least US$78,675,642,677;
  • consolidated total liabilities amount to US$78,538,305,451, of which US$78,480,852,949 relates to digital tokens issued.

The report added that the breakdown “demonstrates that the groupā€™s reserves held for its digital tokens issued exceeds the amount required to redeem the digital tokens issued”.

Tether CTO Paolo Ardoino highlighted Tether’s role in the broader crypto economy, citing its transparency and reliability:

We are committed to serving the fast-growing cryptocurrency market as the strongest stable asset in the Web3 economy. The utility of Tether has grown beyond being just a tool for quickly moving in and out of trading positions, and so it is mission critical for us to scale alongside the peer-to-peer and payments markets. To serve these new retail and institutional customers, Tether will continue to be the leader amongst its peers when it comes to transparency and reliability.

Paolo Ardoino, Tether CTO

Twitter Isn’t Buying It

In predictable fashion, the so-called “Tether Truthers” came out in force, decrying the “attestation”:

Why Tether has elected to go for an “assurance opinion” over an audit remains unclear. Is it protecting its competitive position by disclosing as little as possible, or is something else going on? We can’t know for sure, and so the Tether saga is no doubt going to continue for the foreseeable future.

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Crypto News Stablecoins

New Deal Sees USDC’s ‘Circle’ Double in Value to $9 Billion

Circle, the company behind USDC, announced earlier this week that it had terminated its deal with Concord Acquisition Corp (Concord), a publicly traded special purpose acquisition company (SPAC), and signed a new agreement with it, setting Circle’s enterprise value at US$9 billion:

Circle Value Doubles in Six Months

As reported by Crypto News Australia last July, Circle planned to go public at a valuation of US$4.5 billion, as per the original deal with Concord. However, this new agreement has doubled Circle’s value from 2021, driven mostly by improvements in the firm’s financial outlook and competitive position.

Specifically, USDC has enjoyed tremendous growth over the past year, as the stablecoin’s circulation has more than doubled since the original deal was announced, reaching US$52.5 billion.

We continue to believe that Circle is one of the most interesting, innovative and exciting companies in the evolution of global finance and we believe it will have an historic impact on the global economic system.

Bob Diamond, chairman of Concord Acquisition Corp and CEO of Atlas Merchant Capital

Last year, Circle’s proof of reserves were independently audited, revealing that 60 percent was made up of cash, with the balance being held in debt securities and bonds. The incumbent, Tether (USDT), has been less transparent and perhaps this accounts for its loss of market share to USDC over the past 12 months, reflected in the chart below:

Market share of stablecoins. Source: The Block

Chairman of Concord, Bob Diamond, highlighted the importance of transparency in his comments:

Circleā€™s rapid growth and world-class leadership are underscored by a regulatory-first mindset fixed on building trust and transparency in global markets. We believe our new deal is attractive because it preserves the ability of Concordā€™s public stakeholders to participate in a transaction with this great company.


Bob Diamond, chairman of Concord Acquisition Corp and CEO of Atlas Merchant Capital

While the new transaction agreement has been approved by Concord and Circle’s board of directors, it still requires shareholder approval in both cases, in addition to any relevant regulatory approvals: 

We [Circle] have made massive strides toward transforming the global economic system through the power of digital currencies and the open internet … being a public company will further strengthen trust and confidence in Circle and is a critical milestone as we continue our mission to build a more inclusive financial ecosystem.

Jeremy Allaire, Circle co-founder and CEO

Crypto Twitter Remains Sceptical

While stablecoins no doubt have practical use cases, including swift cross-border transfers and instant settlement, scepticism remains among the crypto community.

Some have noted concerns that users could be banned (or more specifically, have their addresses blacklisted):

Others expressed a sense of distrust that Circle would be involved in the Federal Reserve’s CBDC:

Whatever benefits USDC is able to offer, sentiments such as these are largely expected, given Circle’s relationship with the World Economic Forum and Wall Street.

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Facebook Institutions Stablecoins

Meta’s Diem Plans Fail, Zuckerberg in Talks to Offload Intellectual Property

Diem (formerly Libra), the stablecoin backed by Mark Zuckerberg’s Meta, hasn’t had the best start to the year. It appears that the Diem Association is selling off its intellectual property to Silvergate Capital for US$200 million, The Wall Street Journal reports, citing an unnamed source familiar with the matter.

Diem Fails to Receive Regulatory Approval

The Diem project was presented by Zuckerberg’s Meta (formerly Facebook) in June 2019, formed under the name of the Diem Association. The Libra stablecoin was meant to be backed by a handful of global currencies such as the US dollar, in similar fashion to the business model of Tether’s USDT or USDC.

The Diem Association secured Silvergate Capital, a bank that serves blockchain companies, as the exclusive issuer of the Diem USD. However, Zuckerberg was soon confronted with obstacles imposed by US regulatory bodies and abroad.

The lack of security and privacy was the main concern for regulators, warning off investors including eBay, Mastercard, Visa and PayPal – all of whom resigned as founding members in a single day. Zuckerberg then rebranded Libra to Diem, but it only made things worse.

Diem Association Trying to Repay Investors

The Diem Association is now selling its intellectual property to Silvergate to repay investors, which include tech and investment concerns such as Coinbase, Spotify, a16z, Ribbit Capital, and more high-profile institutions.

It wasn’t as if the news hurt the crypto community. We need to remember that Zuckerberg and his businesses have attracted controversial accusations ever since news broke in 2018 that Facebook had allowed Cambridge Analytica to harvest sensitive data from 87 million users.

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Institutions Payments Stablecoins

PayPal Confirms it is ‘Exploring a Stablecoin’ After Dev Discovers it in Code

PayPal Coin is the new soon-to-be-released stablecoin from Paypal Holdings Inc, as revealed to Bloomberg News by Jose Fernandez da Ponte, PayPal’s senior vice-president of crypto and digital currencies.

Stablecoin Development Code Found Inside the PayPal App

In an interview with Bloomberg, Fernandez da Ponte said: “We are exploring a stablecoin; if and when we seek to move forward, we will, of course, work closely with relevant regulators.”

As per the report, it was PayPal developer Steve Moser who found the hidden code of a stablecoin already in development inside the PayPal app. Moser also found a logo image that read: “PayPal Coin”.

Discovered logo of PayPal’s stablecoin. Source: Bloomberg

However, the code and the image were the products of a recent PayPal internal hackathon – a type of internal gathering frequent in tech companies where employees such as software developers engage and collaborate to promote new products and projects. This means that the final product could change.

Stablecoins Facilitating Payment Systems

PayPal’s effort to engage with the crypto market was one of the main drivers behind the Bitcoin price rally that started in mid-2020 – a year that saw the emergence of the institutional interest in cryptocurrencies.

While most financial institutions were hoarding high market-cap currencies such as bitcoin and ethereum in 2021, the interest in stablecoins quickly took over as they facilitate USD transactions for businesses. On December 13 it became apparent that Novi, Meta’s digital wallet, was on the move to start a stablecoin payments trial by simply sending a text message on the WhatsApp chat app, instantly and with no fees.

However, the stablecoin market has its downside – there is no deposit insurance for holders, for one. But as Crypto News Australia reported last October, the US Government has been studying the possibility of a US$250,000 coverage for holders of these tokens.

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Blockchain Crypto News DeFi Stablecoins Tokens

Web 3.0 Token ‘Near Protocol’ Up 79% in a Month Amid Terra Partnership

NEAR token has been marching steadily upwards to a new all-time high of US$16.37, the most recent rally on December 22 after NEAR announced it was partnering with leading blockchain protocol Terra Money.

Terra is an open-source decentralised network and the TerraUSD (UST) stablecoin is pegged 1:1 to the US dollar, making it an attractive medium of exchange for the DeFi space.

More Collaborations to Come

The integration of UST on NEAR “will be a big step towards growing the Near and Aurora ecosystem”, according to Aiden Knox, founder of NearPad and Rose. ā€œIā€™m excited to be working closely with the Terra team to not only bring UST to NearPad and Rose, but also for the deeper integrations and collaborative projects this partnership enables.ā€

This has indeed been bullish news for NEAR as investors have rushed in. By Christmas Eve, NEAR trading volume had spiked to US$1,475,397,417 as the price rallied to a high of $16.15 on December 27. After a week of healthy consolidation, the NEAR chart is as green as a Christmas tree – its impressive price action has seen the token increase 1060.5 percent in value over the past 12 months.

CoinGecko.com

NearPad – NEAR’s DeFi Hub

NearPad aims to be the leading gateway for the DeFi ecosystem on Aurora – an Ethereum Layer-2 built on top of NEAR blockchain. NearPad consists of a DEX AMM, launchpad, and incubator project Rose – a liquidity protocol on Aurora. NearPad offers a product suite to nurture and grow the DeFi ecosystem.

Three weeks ago, Crypto News Australia reported that NEAR Protocol token had soared 48 percent in a week after listing on MoonPay. Terraā€™s native token LUNA has also had major upside over the past couple of months following Terraā€™s network upgrade, reaching a new all-time high on December 27 of US$103.34.

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Crypto News Ethereum NFTs Stablecoins

Vitalik Buterin Reflects on 2021: ‘I Completely Missed NFTs’

Vitalik Buterin, co-founder of the second-largest cryptocurrency and decentralised ecosystem, Ethereum, has admitted he “completely missed NFTs” (non-fungible tokens).

In a recent Twitter storm, the programmer and crypto writer shared his thoughts about the current state of the industry. Since the launch of Ethereum, Buterin envisioned a future where programmers could build decentralised applications on the Ethereum network and release them to the public. These would include DAOs (Decentralised Autonomous Organisations), ERC-20 tokens, and Oracles.

However, Buterin admits he failed to catch the NFT wave:

Crypto and Stablecoin Adoption on the Rise

Buterin started his thread by saying he had visited Argentina, where he noticed a rise in crypto and stablecoin adoption as more Argentinian businesses were operating with USDT.

Argentina is one of the many examples of how crypto and blockchain technology can be used to combat rising fiat hyperinflation. In a 2013 article, Buterin wrote that cryptocurrencies could protect citizens against declining purchasing power and the reduction of wealth in countries such as Venezuela, Argentina and Iran:

Buterin went on to reflect on the negative impact of the “internationalisation and regulation” of Bitcoin, which he also predicted nearly 10 years ago:

My views today: sure, Bitcoin’s decentralisation would let it still “survive” under a super-hostile regulatory climate, but it could not “thrive”. Successful censorship resistance strategy requires a combination of technological robustness and public legitimacy.

Vitalik Buterin

‘The Internet Of Money Shouldn’t Cost More than 5 Cents’

The Twitter storm also served as the arena for both supporters and detractors of Ethereum. While Buterin claimed that his invention kickstarted the internet of money and that it is still working on scalability, some users fired back at him for the expensive gas fees on the network, which can take up to 50 percent.

Putting aside those discussions, Buterin ended the thread in claiming he had changed his mind about political organisations, saying he was “more naive then”.

On tech, I was more often right on abstract ideas than on production software dev issues. Had to learn to understand the latter over time. I have a deeper appreciation now of the need for even more simplicity than I thought we needed.

Vitalik Buterin

The Ethereum Exodus Continues

While Ethereum has become the largest DeFi ecosystem, its massive popularity has caused it to struggle due to enormous traffic on the platform, which in turn drives up gas fee prices.

This is the main reason why several projects, including NFTs, are moving to other networks to offset excessively high fees on the ETH blockchain, and to achieve a higher throughput.

Ether, however, is one of the most beloved cryptos for whales – as Crypto News Australia reported in August last year, over 43 percent of ETH circulation is in hands of whales, according to analytics platform Santiment.

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Crypto News Crypto Wallets Cryptocurrencies Hackers Stablecoins Tokens

Crypto Exchange AscendEX Loses $80 Million in Hot Wallet Exploit

Crypto exchange AscendEX has lost over US$77 million worth of several high-profile cryptocurrencies, including Ether (ETH), Binance Coin (BNB) and various Polygon tokens, in a breach of its hot wallet.

Three Blockchains Affected

On December 11, AscendEX tweeted about the incident, reporting that it had detected a ā€œnumber of ERC-20, BSC, and Polygon tokens transferred from our hot walletā€. More than US$77 million worth of various tokens across three blockchains was drained by the hacker(s).

$60 Million in ETH Stolen

The amount stolen was known after security firm PeckShield conducted research on the incident. According to the firmā€™s experts, the estimated losses were: US$60 million on Ethereum, $9.2 million on Binance Chain, and $8.5 million on Polygon. Stolen tokens included several stablecoins such as Tether (USDT) and USD Coin (USDC), along with DeFi tokens including Compound (COMP), Aave (AAVE), and the popular memecoin Shiba Inu (SHIB).

The event comes shortly after Crypto News Australia reported the US$200 million hack on centralised US crypto exchange BitMart, which suffered one of the biggest security breaches in crypto history on December 4.

Another exchange to have suffered a major security breach is Hong Kong-based platform Bilaxy, which lost US$450 million worth of several ERC-20 tokens in an August incident.

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Blockchain Crypto News Facebook Payments Stablecoins

Meta’s Crypto Project Novi Begins WhatsApp Stablecoin Payments Trial

Novi, a new crypto wallet for sending digital payments through WhatsApp, is available now and being trialled for a limited number of people in the US. Transferring money to friends is now as easy as sending a text message and you can do it all within the WhatsApp chat app, instantly and with no fees.

Novi is a new way to send and receive money – instantly, securely, and with no fees. With Novi on WhatsApp, you can transfer money without ever leaving your WhatsApp chat.

novi.com/WhatsApp

Stephane Kasriel, Metaā€™s head of cryptocurrency and fintech at Novi, officially announced the rollout of Novi via Twitter on December 9:

Meta Fine-Tunes its Fintech Ambitions

It’s no secret that Meta head Mark Zuckerberg has huge ambitions for his company, formerly known as Facebook, to claim its space in the world of crypto and fintech. Facebook first launched its cryptocurrency project, Libra, in 2019. Then it was rebranded to Diem, a stablecoin to be pegged to the US dollar.

Despite facing opposition from regulatory parties who have concerns over giant tech companies entering the world of blockchain-based finance having too much power, Novi has partnered with stablecoin provider Paxos and is now live through WhatsApp.

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Crypto News Payments Ripple Stablecoins

Small Island Nation Palau Partners With Ripple on Eco-Friendly Digital Currency

The Republic of Palau, an archipelago of 500-plus islands and part of the Micronesia region in the western Pacific Ocean, is partnering with digital payment network Ripple to develop its own digital currency.

Palau Wants a Stablecoin, Not a CBDC

According to an announcement by Ripple on November 23, the partnership will focus on developing strategies for cross-border payments, resulting in the creation of the world’s first government-backed national stablecoin.

Ripple has experience building global payment systems and has made provision to implement its new stablecoin during 2022, looking to assist the country from a technical, business, design and policy perspective.

As part of our commitment to lead in financial innovation and technologies, we are delighted to partner with Ripple. The first phase of the partnership will focus on a cross-border payments strategy and exploring options to create a national digital currency, providing the citizens of Palau with greater financial access.

Surangel Whipps Jr, Palauā€™s President

Interestingly, Palau has elected to create its own digital currency rather than a CBDC. One of the primary reasons for doing so is that the island nation has committed to being carbon-neutral and was apparently attracted to XRP on the basis of it being carbon-neutral and 120,000 times more energy-efficient than proof-of-work (PoW) cryptocurrencies. Furthermore, it saw XRP as offering advantages over PoW with regards to scalability, speed and reduced costs.

We are excited to be working with Palau to achieve its financial and climate-related goals. We have a wonderful opportunity to bring together our technology and experience with the unique characteristics of Palau to make a real economic and social impact for the country.

James Wallis, VP, central bank engagements, Ripple

Despite its gaining a lot of positive attention, some have questioned the value of the partnership:

Ripple Moves Forward Despite SEC Case

Recently, Ripple joined Bhutanā€™s Royal Monetary Authority (RMA) to test retail, cross-border, and wholesale CBDC payment systems for a digital Ngultrum. And despite an ongoing battle with the US Securities and Exchange Commission (SEC), Ripple has plans to go public and provide support for nations issuing CBDCs.

Evidently, Ripple still has some obstacles to overcome in the near term. Notwithstanding, its recent actions suggest the company remains largely uninhibited in its push towards global adoption.