Anchorage Digital, a federally chartered crypto bank, is phasing out USDC, attributing its decision to decentralized finance innovation risks. The move directs institutional clients to convert USDC and other stablecoins into the alternative token Global Dollar (USDG), sparking significant criticism within the crypto community.
The company introduced a Stablecoin Safety Matrix, assessing various stablecoins based on regulatory oversight and reserve asset management. USDC, a Circle-issued stablecoin with a $61 billion supply, was flagged as unsuitable under Anchorage’s security protocols. The decision also affects two other lesser-known tokens, Agora USD (AUSD) and Usual USD (USD0).
Impact of Decentralized Finance Innovation
“After reviewing our Stablecoin Safety Matrix, USDC, AUSD, and USD0 no longer meet Anchorage’s criteria for long-term resilience,” noted Rachel Anderika, Anchorage’s head of global operations. She pointed out increased concentration risks tied to these issuers’ structures, urging institutions to examine such risks closely.
She added, “Anchorage Digital supports stablecoins that exhibit strong transparency, independence, security, and anticipate emerging regulatory standards.”
This shift occurs amid intense competition in the stablecoin sector, with banks, payment firms, and crypto entities vying for dominance. The newly passing GENIUS Act by the U.S. Senate aims to standardize rules for these assets, potentially accelerating adoption. White House crypto czar David Sacks has indicated the legislation might become law next month.
Research by Citi and Standard Chartered projects stablecoins could grow substantially in the coming years. Circle (CRCL) recently went public, dramatically increasing its market value.
According to Anchorage’s assessments, USDC received a low score for regulatory oversight and reserve management, citing a lack of “substantive prudential oversight” and a significant amount of reserves—about 15%—held in cash. The temporary depegging of USDC in March 2023 during a partner bank’s collapse underscored these concerns. In contrast, Tether’s USDT was rated higher, being regulated in El Salvador.
Industry Reaction and Pushback
The decision by Anchorage prompted a strong response from industry leaders.
Nick Van Eck, representing Agora, accused Anchorage of misrepresenting facts about AUSD and not disclosing its own stake in the USDG’s issuance, backed by a consortium including Paxos and others. Anchorage helped establish this group.
“Had Anchorage merely prioritized its economic interests by delisting USDC and AUSD, it would have been a rational business move,” he expressed on X (formerly Twitter). “However, undermining AUSD and USDC under the guise of ‘security concerns’ while distributing misleading information is unwarranted and peculiar.”
Viktor Bunin from Coinbase labeled it a “poorly executed hit piece.” Coinbase and Circle jointly launched USDC, sharing the token’s reserve assets’ revenue.
On the contrary, Circle defended its reputation for compliance and industry leadership, citing its transparency and support from major banks.
Backing for Circle and Agora extended beyond their immediate alliances.
“For clarification, BitGo will continue supporting USDC,” declared Chen Fang, BitGo’s chief revenue officer. FalconX’s Joshua Lim, a crypto prime broker, affirmed his firm’s readiness to accommodate AUSD and USDC users.
At Bakara Invest, our analysis suggests that Anchorage’s actions, rooted in decentralized finance innovation, may catalyze a broader industry introspection on stablecoin oversight and issuer transparency.
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