One of the many crypto projects that’s looking to become the next best decentralized stablecoin is a Polkadot project called Akala which recently saw the peg of its ausd.

Stablecoin fall to zero after an error in the code allowed an exploiter to mint over 1,2 billion ausd with no collateral. Ironically enough Akala responded by pausing its power chain and freezing the exploiter’s wallet leading to criticisms that the project is not truly decentralized.

Something that turned out to be true for many other so-called decentralized stable coins while Akala managed to resolve the issue by burning the additional ausd it looks like the confidence in its decentralized stablecoin has been shaken as it has yet to recover its dollar peg at the time of shooting with some luck they will get that glaring issue sorted out pronto. Meanwhile HUSD a centralized stablecoin issued by the Hobie cryptocurrency exchange also temporarily fell off its peg causing panic in the crypto community as it was believed to be a more trustworthy stablecoin due to its centralized nature.

An HUSD spokesperson explained afterwards that the temporary peg deviation was due to the closure of certain market making accounts something they had to do to comply with regulations and with no market makers around to stabilize HUSD against other stable coins.

HUSD fell off its peg to Huobi’s credit. This degree of transparency is not common among centralized stablecoin issuers notably Tether which that said has apparently turned over a new leaf on the transparency front this is because it’s hired one of the top accounting firms to provide attestations for the assets backing USDT. The first of these attestations revealed that Tether cut its commercial paper holdings by nearly sixty percent and commercial paper is code for risky corporate debt which makes the cut good for the trust in USDT not only that but it turns out that just under half of the USDT in circulation is backed by short-term US government debt something that could result in leniency from regulators in the United States. Given that Tether is effectively helping to subsidize the government’s spending through USDT. Now if you thought that was crazy take a second to consider that Circles USDT and Paxos’s BUSD stablecoins are mostly backed by some form of US government debt.

The only real difference is that Circle and Paxos are based in the United States meaning they are subject to more oversight than Tether. The only reason why Tether is suddenly turning to transparency is because crypto holders see USDC and BUSD as being much safer than USDT and for a while this was leading to lots of USDT redemptions ie people cashing out their USDT for actual dollars.

Over the last few weeks however USDT’s market cap has been growing again thanks in part to Tether’s increased transparency and the gradual expansion of its services something that was ultimately incentivized by the free market competition of cryptocurrency. It’s this same competition that prompted Circle to release what appears to be the first of its weekly breakdowns of the assets backing USDC along with how much USDC was minted and redeemed. As you can see around 1 billion of USDC was redeemed relative to how much was minted.

Now these stable coin flows are significant because they show you whether crypto investors are simply fleeing to safety aka stable coins or whether they’re cashing out of crypto. Completely in case that didn’t make it clear enough last week was all about cashing out probably because of the sudden dip.

Now besides competition upcoming stablecoin regulations have Tether Circle and Paxos trying to up their transparency and it’s anyone’s guess as to whether it will be enough to satisfy the regulators come September when the stablecoin bill is tabled discussed and inevitably becomes law. .