All’s fair in love and stablecoins

NEW YORK, March 22 (Reuters Breakingviews) - If a stablecoin isn’t first, it’s last, as Circle has learned this month. The company that issues USDC lost its peg to the dollar earlier this month because of worries about the $3.3 billion it held at Silicon Valley Bank. Though Circle recovered the funds from the bank, customers pulled $6 billion from it, according to Bloomberg. Competitor Tether’s flows went up by as much.

That’s despite Tether’s relationship with controversy. Last year, the New York Times dubbed it “the coin that could wreck crypto.” New York regulators claimed it had misrepresented its reserves, and the Wall Street Journal reported it falsified documents to gain access to bank accounts. Circle Chief Executive Jeremy Allaire, in contrast, does regular rounds in Washington and has argued for regulation. An announcement from Circle following SVB’s collapse was clear, transparent, and level-headed.

Tether lost its peg last year, but it recovered shortly thereafter. And the company said it doesn't rely on American banks, including SVB. Still, in a market predicated on speculation, it’s probably reasonable for investors to be spooked. What’s less reasonable? Their decision to move money from one asset built on the backbone of a speculative business to another. (By Anita Ramaswamy)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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