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USDC is considered one of the safest stablecoins. It is issued by Circle and jointly promoted by Coinbase.
USDC’s reserves comprise short dated US Treasuries and cash deposits in fully segregated accounts. However, Circle's claims of USDC reserves being bankruptcy-remote are yet to be proven, making it less safe than its NYDFS-approved peers.
USDC is one of the most versatile stablecoins that is suitable for the general public, institutions and crypto traders due to its deep liquidity and wide market coverage on centralized and decentralized exchanges, multiple on/off ramp partnerships and conservative approach to regulatory compliance and reserves management.
USDC's rating can be upgraded from B+ to A- by:
establishing that USDC's reserves are bankruptcy-remote AND
incorporating transparent and reasonable timelines for redemption in the Terms of Service, similar to conditions imposed by the NYDFS on stablecoin issuers under its authority.
The Stability factor is evaluated on the following:
1. Reserves Management - Quality, quantity, storage and segregation of reserve assets
2. Market Feedback - Indicators of market's confidence in a stablecoin derived from price and trade data
3. Mechanism - Stabilization methods that protect the stablecoin
Very Low Risk
Very Low Risk
The Management factor is evaluated on the following:
1. Restrictions - What deterrents exist to prevent key personnel of stablecoin projects from unethical and illegal behavior?
2. Negative Track Record - Have key personnel been involved in scams, frauds or other illegal activities?
This factor aims to assess risks arising from technical implementations – i.e, smart contract code and oracles. It is currently not assessed, but we plan for it to be evaluated in the future.
The Decentralization factor is evaluated on the following:
1. Platform Censorship Risk
2. Custodian Risk
3. Type of Collateral
4. Diversified voting Power
5. User Censorship Risk
The Governance factor for fiat-backed stablecoins is evaluated on the following:
1. Holder Protection - What rules, statutes or code exist to protect interests of stablecoin holders?
2. Reserves Verification - What checks are done to ensure existence of reserves?
3. Redemptions - Do issuers have transparent and reasonable redemption terms?
This factor seeks to incorporate external feedback mechanisms such as market and social sentiment into our internal ratings. It is currently not assessed, but we plan for it to be evaluated in the future.