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Circle Refutes

Circle CEO Refutes Rumor of USDC Collapse Due to Exposure to Troubled Firms

Circle – the company behind the second-largest stablecoin by market cap, USDC – reiterated its positive financial position amid a rumor calling the company on the brink of collapse. As the reports went viral, CEO Jeremy Allaire laid out detailed documents on the company’s latest status on transparency and trust, audits and attestations, as well as on the state of USDC’s liquidity.

Refuting the Rumor

Allaire’s Twitter thread came in response to a running rumor by a Twitter user, Geralt Davidson, claiming that Circle has lost billions of dollars over the years as it injected high incentives for crypto-oriented banks such as Signature and Silvergate to convert their cash deposits into USDC.

In addition, USDC lendings, being exposed to troubled companies like Genesis, BlockFi, Celsius, Galaxy, and 3AC, have caused Circle at risk of a bank run as billions of USDC won’t be returned in time, Davidson added.

During the violent market pullback, many crypto lending and borrowing firms have fallen prey to a liquidity crisis that soon spread across the industry, causing companies to claim insolvencies. It’s worth noting that USDC is one of the most popular cryptocurrencies used for lending activities.

In response, Allaire clarified the confusion regarding the relationship between reserves and USDC that is used in the lending markets:

5/ It’s understandable why some users would be paranoid given the history of hucksters in crypto. We have always tried to hold ourselves to the highest standards afford to us. That’s enabled us to work with regulators, top-tier assurance firms, and leading FIs.

— Jeremy Allaire (@jerallaire) July 2, 2022

To further back up his point, he posted Circle’s latest documents on USDC’s liquidity matters and its status on transparency and trust. The records noted that the USDC reserve is held entirely in cash and short-dated US government obligations, consisting of US Treasuries with maturities of 3 months or less:

“As of 12:00pm EST Friday, May 13, 2022, the USDC reserve consisted of $11.6 billion cash (22.9%), $39.0 billion U.S. Treasuries (77.1%), for a total of $50.6 billion (100%), and there were 50.6 billion USDC in circulation.”

According to Circle, the USDC reserve does not contain any other high-risk digital assets, assets denominated in currencies other than US dollars, or assets held with third parties subject to lock-ups or other restrictions upon liquidity.

Eyeing for a public listing on the New York Stock Exchange, Circle said it had worked closely in compliance with regulators, and its past two published annual audits will be included as part of its SEC filings.

Allaire added that Circle would share a blog post this week on Circle Yield – the company’s yield interest rate product built entirely on the USDC stablecoin – providing more transparency regarding its regulatory status and over-collateralization. However, the report will be only available to “accredited investors.”

A Similar Response From Tether

As USDC’s major rivalry, Tether’s stablecoin USDT was reportedly targeted by hedge funds following the Luna-UST fiasco due to controversies surrounding the transparency of Tether’s assets in reserves.

In May, Tether issued a report confirming that its stablecoin is fully backed with cash, liquid assets, and other investments. The company’s CTO responded by calling the move a “coordinated attack,” adding that those short selling USDT will eventually have to buy back the stablecoin.

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