Given the widely publicized troubles faced by Tether (USDT), there is a massive opportunity for a competitor to settle into the stablecoin arena. It appears that Coinbase will be that adversary, as the crypto exchange is taking the opportunity to double down on USDT’s problems and expand USD Coin (USDC) trading into 85 countries.
It is no secret that USDT is extremely vital as a source of liquidity mainly in cryptocurrency markets. The need to retreat to a less volatile coin during periods of market stress is obvious, and USDT provides that. However, due to Tether’s ongoing legal troubles, the crypto market’s foundations are built on a rather unstable base.
On April 24, the office of the Office of the New York Attorney General (NY OAG) had accused Bitfinex of losing $850 million of funds needed for user redemptions, and subsequently using capital from affiliated firm Tether to secretly cover the shortfall. However, this May 13, a letter from iFinex claimed that the NY OAG was grossly overreaching its purview with some of the stipulations and language used in the court filings, stating that the respondents’ lawyers do not waive their Motion to Vacate the ex parte – April 24, 2019 Order in its entirety. It noted that in discussions thus far, parties on both sides have been unable to reach agreement, and critiqued the NY OAG’s recent counterproposal.
The crux of the respondents’ contention was the NY OAG’s restriction on the use of stablecoin reserve funds, whether for investment purposes, related-party transactions or distributions and dividends. Elsewhere, the letter argued that Order could be misconstrued to suggest that Tether “May only invest in cash or cash-equivalent accounts,”
Since USD Coin is a large, well funded, and regulated global operation, they are excluded from the kind of obstacles Bitfinex and Tether are facing along the way.
It is well known that, Tether has failed to provide any sought of transparency and Coinbase is absolutely aware of this fact. With plenty of skeptics out there seeing a prolonged period of instability for USDT, it reveals that crypto markets use it as a prominent means of providing just the opposite.
Ultimately this is a kick out for Coinbase. They can provide an essential service, improve upon their most significant rival’s offering, and expand at an opportune time. Chaos is always an opportunity for someone, and with USD Coin, Coinbase isn’t going to let this one pass them by. While there exist various other stable coins, capital and brand recognition come prominently with USDC. In the long run, it’s hard to see how Tether competes unless they can prove they have the requisite funds to back the coin and/or The U.S. government clears them fully.
From which neither seems to be an advantaged probability.
