At the moment (and in the foreseeable future) no centralized stablecoin is safe. Period. Unless you have no other options in or outside crypto, do not keep money in stablecoins for any amount of time beyond what you need the stablecoin for (trading at an exchange that doesn't accept fiat, paying for goods to a merchant that only accepts stablecoins, etc.). By keeping money in a centralized stablecoin you are getting the downsides of the traditional financial system (intermediaries can easily control and freeze your money) without any of the protections afforded by battle-tested regulations of that financial system (your money is not insured and if something goes really wrong, as it has several times already, your "dollars" are gonna be worth as much as the
Zimbawean dollar).
Now what I stated is a theoretical statement based on (IMO) a rational assessment of the pros and cons of stablecoins. However, if that has not convinced you, let's look at some examples. Starting with the biggest elephant in the room - Tether / USDT. Let's just check
their Wikipedia page for the thing that matters the most to any stablecoin holder - whether their stablecoins are backed by real US Dollars:
Tether claims that it intends to hold all United States dollars in reserve so that it can meet customer withdrawals upon demand. It was unable to meet all withdrawal requests in 2017.[40] Tether purports to make reserve account holdings transparent via external audit; however, Tether never produced an audit showing it had the purported reserve.[21] In January 2018 Tether announced that they no longer had a relationship with their auditor.[41]
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On September 19, 2022, due to an ongoing lawsuit in New York District Court, Bitfinex and Tether (referred to in court records as B/T), were ordered to produce documents showing the backing of USDT, the outcome of which is still pending.[43]
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In September 2017, Tether published a memorandum from a public accounting firm that Tether Limited claimed showed that tethers were fully backed by US dollars;[46] however, according to the New York Times, independent attorney Lewis Cohen stated the document, because of the careful way it was phrased, does not prove that the Tether coins are backed by dollars.[17] The documents also fail to ascertain whether the balances in question are otherwise encumbered.[40] The accounting firm specifically stated that
This information is intended solely to assist the management of Tether Limited ... and is not intended to be, and should not be, used or relied upon by any other party.[46]
Tether has failed to present audits showing that the amount of tethers outstanding are backed one-to-one by U.S. dollars on deposit despite repeated claims that they would.[47] A June 2018 attempt at an audit was posted on their website in June 2018 which showed a report by the law firm Freeh, Sporkin & Sullivan LLP (FSS) which appeared to confirm that the issued tethers were fully backed by dollars. However, FSS stated "FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles," and "The above confirmation of bank and tether balances should not be construed as the results of an audit and were not conducted in accordance with Generally Accepted Auditing Standards."[7] Stuart Hoegner, Tether's general counsel said "the bottom line is an audit cannot be obtained. The big four firms are anathema to that level of risk. We’ve gone for what we think is the next best thing."[47]
(I've specifically left the source numbers in to make a point that these statements were sourced from external publications)
If this is not giving you massive warning signs, I don't know what will. If you're looking for a more in depth perspective of what USDT is and who its run by, I'd recommend Youtuber Coffezilla's "
Exposing Tether - Bitcoin's Biggest Secret" as a starting point. While I do find him a bit too clickbait'y in his style, the points he presents are solid and it's a great tl;dr, even if you're not interested in researching the topic further.
Moving over to Binance's BUSD, while it
seems to be less risky than USDT (which is a very low bar), it's important to not just look at what BUSD is, but what Binance is. While it seems to be one of the largest, if not the largest, cryptocurrency exchange offering a product whose security relies on a strong regulatory environment,
the company is established in the Cayman Islands, a well known
financial offshore territory. They did open a separate entity (Binance.US) for their US customers (after Binance was banned from operating in the US) "
which nonetheless is banned in six states: Hawaii, Idaho, Louisiana, New York, Texas, and Vermont". Furthermore, according to a Reuters special investigation "
How Binance CEO and aides plotted to dodge regulators in U.S. and UK", it seems like Binance isn't really a big fan with having to comply with government regulations, sometimes even (allegedly) through legally questionable means such as backdating documents intended to avoid new laws. Stepping away from all the regulation stuff, we have Binance's Binance Smart Chain, which the exchange seems position as part of
decentralized finance in its marketing (e.g. Binance in its article "
Binance and BNB Chain: What’s the Difference?" states that "BNB Chain was originally initiated by Binance but has since grown to become a community-driven, permissionless, and decentralized blockchain ecosystem.") yet,
according to a Messari researcher, it seems that Binance Smart Chain and its accompanying Binance Chain seem to be effectively centralized.
Now to be fair, it's indeed true that BUSD was founded by Binance in partnership with Paxos with Paxos holding the reserves (as per the their Wikipedia article), I'd still be skeptical as in large and complicated systems with a lot of moving parts, there's still ways those systems can collapse on their own, let alone if any malice is involved (e.g. something going wrong with the Binance issued Binance-Peg BUSD)
And now we've reached USDC. Ironically, of all the big centralized stablecoin players I consider USDC as the least questionable player. While I don't know the credibility of the claims that USDC is in trouble (as cited by OP), if those allegations are true, that should tell you everything you need to know about how trustworthy any stablecoin is, let alone the less reputable ones.
P.S. While some users might jump in and suggest DAI (or similar decentralized stablecoins) as alternatives, do keep in mind that there's been
reports that more than half of DAI's collateral is comprised of USDC. So if there are any major centralized players, decentralized collateral-based stablecoins might be subject to similar pitfalls to their centralized counterparts. And if we were to turn to algorithmic stablecoins, I think most of us remember the UST death spiral.
P.P.S. If you want to keep a substantial amount of money in USDC or in any other stablecoin for those high (and usually completely unsustainable and / or incredibly risky) returns in an attempt to avoid inflation slowly eroding your assets, I'd recommend checking
this post of mine out for ideas.
