The attestation was performed by Grant Thornton LLP, one of the largest accounting firms in the U.S. and is the first of what is to become a monthly occurrence for the stablecoin. In the report, which was conducted for the month of October and was signed on November 16, 2018, Grant Thornton found that Circle Internet Ltd. holds $127,412,240.89 in a custody account for USDC. This amount is enough (and then some) to cover the outstanding 127,408,827 USDC in circulation at the time of the attestation.
“In our opinion, the Reserve Account Information in the accompanying Reserve Account Report as of October 31, 2018 at 11:59 PM UTC is correctly stated, based on the criteria set forth in the Reserve Account Report, in all material respects,” the report reads.
Grant Thornton says in the write-up that the “examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants.”
Notably, Grant Thornton’s examination is an attestation, not an audit. Though they resemble each other in function, the makeup of each has some subtle differences. An audit may be conducted to look at an entity’s financial status along with other non-financial factors (e.g., internal controls, security measures, general operations) to make sure that there aren’t any weak points in the entity’s operations and that it is complying with current laws and regulations.
An attestation, conversely, looks at compiled data and checks that data using an agreed-upon procedure. Bernard Gallagher offers a succinct distinction between the two on I.S. Partner’s website.
One of the things to keep in mind to differentiate each of these services is that audits are performed to discover data, risks, or compliance issues that may not have been known before the audit took place, and attestation is to evaluate and review how true the data or information is when compared to a stated purpose, internal control or system.
For USDC’s attestation, the data shows the number of coins in circulation measured against the amount of money in Circle’s bank account reserves. The procedure follows what Grant Thornton calls in its report “[obtaining] evidence about the Reserve Account Information.” Further, the “nature, timing, and extent of the procedures selected depend on [Grant Thornton’s] judgment,” and the final findings are expressed in the “opinion” that the accounting firm declares at the end of the report.
Operating under the auspice of Centre, a company established jointly by Circle and Coinbase, USDC is one of many new fiat-collateralized stablecoins to come to market this year. In a similar bid for transparency, others, including TrueUSD (TUSD), GeminiUSD (GUSD) and the Paxos Standard (PAX), have also pledged to make their bank accounts transparent by conducting similar attestations or audits.
By employing the work of mainstream accounting firms, these newcomers are hoping to safeguard against the same negative scrutiny that has maligned tether (USDT), the market’s most popular stablecoin. Suspicion surrounding Tether’s bank balance has led skeptics to believe that USDT lacks true parity between dollars in the bank and coins on-chain.
In an effort to quell these concerns, Tether conducted its own attestation in June 2018, though, unlike its successors’ attestations, this was carried out by a law firm, as Tether has repeatedly claimed that securing an official audit from a public firm isn’t possible. Moreover, the attestation wasn’t performed “using generally accepted accounting principles,” leading critics to believe it was conducted less as a sincere act of good faith and more in an effort for Tether Ltd. to save face.