Monday, 17 Jun 2019

The Ledger: Soulja Boy’s ‘Bitcoin’ Millions, PwC Backs a Stablecoin, Tether Sinks Below $1


PricewaterhouseCoopers, the top accounting firm better known as PwC, is backing a cryptocurrency—specifically, a so-called stablecoin backed by the U.S. dollar.

The accounting firm is partnering with Cred, a decentralized lending startup that’s developing a new stablecoin pegged to the dollar, PwC announced Monday. PwC will offer its accounting expertise to ensure Cred’s dollar-backed coin “can provide 100% transparency and value substantiation,” the firm said in a statement.

To hear PwC tell it, a lack of trust in stablecoins—and the existence of the dollar reserves backing them—has been keeping many potential investors out of cryptocurrency entirely. According to PwC, making the dollar reserves backing stablecoins fully auditable will “usher in the next 100 million users of crypto assets.”

PwC is just the latest major firm to jump on the stablecoin bandwagon, joining companies like IBM and venture capitalist Andreessen Horowitz, who see the coins as a digital proxy for the dollar—and therefore a more easily transferable version of cash.

While the original dollar-backed stablecoin, Tether, has become so popular that it accounts for more Bitcoin trading volume than the U.S. dollar itself, doubts persist about whether it actually has a dollar in reserve for every coin on the market. Tether commissioned a law firm to review its balances and released the figures in June, but warned specifically that the review “should not be construed as the results of an audit.”

Though PwC never mentions Tether by name, between the lines of its announcement is a clear condemnation of Tether, which has so far failed to submit to an audit of its reserves.

Fears about Tether crystalized last week, when the price of the stablecoin—which is supposed to stay stable at $1—fell to as low as 95 cents on the Kraken cryptocurrency exchange before later rebounding. “If I knew that there was a dollar in the bank for every coin, if somebody wanted to sell me a dollar for 95 cents, I would be buying them,” BitGo CEO and founder Mike Belshe tells Fortune on the latest episode of Balancing the Ledger. “So the fact that they’re not out there on Kraken buying those tells me that there’s something wrong with it.”

Those concerns are why BitGo doesn’t support Tether in its wallets, though it does support stablecoins from Circle, Paxos and Gemini. “If you want to have a good stablecoin, it needs to actually be backed by $1,” opines Belshe.

PwC, bringing its auditing renown to stablecoins, is betting many investors will agree.

SCAM UPDATE: In my last installment of this newsletter a few weeks ago, I described a seemingly fraudulent site called Coins Miner that had misappropriated videos I’d filmed for The Ledger and used them to make false claims in its own marketing materials. I’m pleased to report that the very next day, the Texas Securities Commissioner filed an emergency action against Coins Miner and the “Russian hoaxer” allegedly behind the scam. The lesson: Stay alert for potential scams, and report them to securities regulators.


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