As part of our updated Roadmap activities, the InsurAce team is delighted to launch another landmark product — the USDC De-peg Cover. With this milestone product launch, we are now able to extend DeFi Coverage to an ecosystem of over 10 million USDC stablecoin holders across 85 countries around the world.
Although, InsurAce users can already purchase Smart Contract Vulnerability Cover for their USDC assets staked on various DeFi protocols with this latest product launch, starting from October 3rd, 2022, InsurAce users will now be able to purchase Cover against a USDC de-peg event as well.
Stablecoin de-peg is one of the most potent risks that DeFi users and investors face globally. With the USDC De-peg Cover product, InsurAce users are now eligible to claim compensation in the event that the USDC stablecoin slides below $0.94 cents to the dollar.
The Cover terms are outlined in the well-detailed Cover wording here.
- Product — USDC Stablecoin De-peg Risk
- Chain — Ethereum, BNBChain, Solana, Avalanche, Optimism, Polygon (Matic), Arbitrum, Fantom & Aurora.
- Monthly Premium — 0.08%
- Initial Capacity — $1.4 million
- Read cover wording — here
- Buy Cover — here
What is USDC
USD Coin, known by the ticker USDC, is a stablecoin that is pegged 1:1 to the U.S. Dollar.
USDC was launched in 2018 by Circle and managed Centre Consortium — an independent body that comprises of Circle and Coinbase CEX. According to Circle, every unit of USDC in circulation is backed by USD reserves, held in a mix of cash and short-term securities i.e., U.S. Treasury Bonds.
Within 2 years post-launch, USDC has grown rapidly to become the second most widely adopted stablecoin in the world — behind only Tether’s USDT. As of October 2022, USDC has a Market Cap of $46bn, representing ~5% of the total Crypto Market Cap.
What is a Stablecoin De-Peg Event?
A stablecoin de-peg event is an unfortunate and unforeseen occurrence where the market price of a stablecoin falls significantly below its $1 peg.
Generally speaking, stablecoins may de-peg due to various reasons such as DeFi exploits, liquidity issues, proprietary trading on the part of the issuer(s), adverse market movements in the collateral assets, or smart contract vulnerability in the case of algorithmic stablecoins.
Why You Should Get USDC Coverage
- Rampant and Severe De-peg Events
Historical data shows that on average, 3 to 5 stablecoins suffer a de-peg event annually. Over the last 2 years, DeFi investors have suffered nearly $45bn in catastrophic losses from TerraUST, Iron Finance, and most recently Huobi’s hUSD and Acala’s aUSD de-pegs.
In May 2022, USDT’s de-peg to below $0.95 in the wake of TerraUST’s crash to near zero reminds us that even the largest stablecoin backed by fiat and having some of the deepest liquidity in the stablecoin market can and will de-peg during periods of immense volatility. The USDT de-peg caused worldwide panic and liquidations of up to $10bn.
- Impending Regulatory Activity May Disrupt Stablecoin Industry
According to the Bank of International Settlement, most countries are currently looking into Central Bank Digital Currencies (CBDCs).
Impending government participation in DeFi could lead to varying levels of disruption in the Stablecoin industry. For example, demand or the need for the provision of certain types of stablecoin liquidity may be affected by competition with CBDCs, thereby threatening stablecoin price stability.
- Fierce Competition in the Stablecoin Industry
Competition amongst the leading stablecoins USDT, BUSD, and USDC has been intense over the past year. It was further exacerbated In September 2022, when Binance announced that it would now auto-convert all stablecoin deposits to BUSD (excluding USDT).
Competition in the stablecoin economy is expected to intensify over the coming months and years as major crypto-backed stablecoins like MakerDAO’s DAI also begin to switch to a hybrid approach with a mix of fiat-based securities and cryptocurrencies as collateral assets.
There’s no telling how this intense competition could impact each player in the Stablecoin economy.
When will InsurAce’s USDC De-peg Cover Take Effect?
Stablecoin cover is the simplest and most straightforward form of protection against the events outlined above. Starting from 3rd October 2022, USDC holders will be able to purchase InsurAce’s Stablecoin De-peg Cover from the InsurAce dApp.
With competitive prices and attractive returns for underwriters, InsurAce has established its position as a leading cover provider. Most notably, during the TerraUST crash in May 2022, InsurAce bailed out over 150 victims with around $11.7 million in payouts, settling the entire claim process within just 2 weeks of the de-peg event, and now, InsurAce is set to expand its protection to the 10 million+ USDC holders globally.