Per Coinbase
Coinbase has called on its users to switch stablecoins from USDT to USDC. To help with the transition, they announced that they would waive the trade conversion fees.
USDT, the stablecoin owned by Tether, has been subject to scrutiny in the past for questions regarding whether or not it really had the assets to back the stablecoin 1:1. Tether was ordered to produce financial records to prove that USDT was rightfully backed, per Coin Desk.
For reference, a stablecoin has to be backed one-for-one with the currency it represents. USDT is a stablecoin that should supposedly have a one-for-one backing with the US dollar meaning its value should never go below or above $1 (although it slightly variates due to transactions).
The risk of an unbalanced stablecoin can be seen in the recent fall of Terra's UST, which was an algorithmic stablecoin that wasn't backed directly by dollars but by another cryptocurrency (which varies in price as it is traded), LUNA.
The fall of UST saw an estimated $60 billion wipeout, per Forbes. The fall of UST also affected how stablecoins were viewed so that more people became more cautious of the stablecoins they use, like Binance and now Coinbase, which is urging users to switch from USDT to USDC.
Coinbase also highlighted that they co-founded USDC (USD Coin) in 2018 and promised that it is backed by cash and short-dated US treasuries officially held in US-regulated financial institutions and that it can be redeemed 1:1 for US dollars.
According to its FAQ, the company also highlights that eligible customers will get up to 1.5% APY by holding USDC on the exchange.
During the FTX collapse, USDT was de-pegged and traded at a low of $0.93 before returning to $1, per another article by Coin Desk.
Binance also announced that it stopped support for USDC and auto-converted customers from USDC to BUSD, the exchange's very own stablecoin.
Resources:
See flow at unusualwhales.com/flow.
