Jeremy Allaire, CEO of financial services company Circle, has decided to shut down rumors that the company’s USDC stablecoin is on the verge of collapse.
In a Twitter thread posted over the weekend, Allaire said he could understand why the crypto community would “be paranoid” about USDC, given the recent collapse of several prominent crypto projects.
“Circle is in the strongest position it has ever been financially, and we will continue to increase our transparency,” the Circle boss said.
8/ Circle is in the strongest position it has ever had financially, and we will continue to increase our transparency. FWIW, we are also encouraged by the emerging regulatory frameworks for stablecoin issuers, which should help to further increase trust in issuers like Circle.
Circle CEO’s remarks arrive amid rumors that the company is at risk of defaulting on its USDC reserves due to the large interest payments it must make to crypto-centric banks like Signature and Silvergate.
The stablecoin is also used in lending activities involving Genesis, BlockFi, Celsius, Galaxy, and Three Arrows Capital (3AC). Each of these crypto firms has been caught in a liquidity crunch that has rippled through the entire industry.
Circle’s USDC program is on the verge of collapse. If you read their SPAC IPO documents, it’s clear that they’re constantly losing money, but there’s something dirtier going on underneath. They are at major risk in the event of a default on USDC reserves. A deep dive 🧵 on USDC. 👇 pic.twitter.com/GgN5oeD7gO
Allaire seems to have tackled these rumors head on, explaining that there is a difference between USDC reserves and the actual USDC used in the lending markets.
“There is also obvious confusion between USDC reserves — which are regulated (where and what we can hold), scrutinized (by regulators and insurance companies), and transparent (weekly feed and composition) — and USDC which itself is used in lending markets, away from Circle,” Allaire wrote.
7/ On the last point regarding Circle Yield, we will be sharing a blog post this week, but the bottom line is that because Circle Yield is regulated, over-collateralized, offered as security only to accredited investors, and has a very conservative UW approach, we had no problem.
He added that Circle would share a blog post this week on Circle Yield – the company’s short-term and long-term interest rate product built entirely on the USDC stablecoin, pointing out that the product in question is both regulated. and over-collateralized, and is offered only to accredited investors, with whom Circle “had no problem”.
Circle, which is considering an IPO through a special purpose acquisition company (SPAC), was valued at $9 billion in February this year. In addition to annual audits, the Boston-based company also publishes monthly statements of the size and composition of the USDC reserve.
The USDC stablecoin is the second-largest stablecoin in the crypto market, with a market capitalization of $55.8 billion, doubling in the last year and around $10 billion from market leader Tether (USDT).
Circle insists that the USDC stablecoin “is always redeemable 1 for 1 against US dollars. Any amount. Still. Period”, the firm said in his latest cash statement.
“We can make this statement with confidence because USDC is entirely reserved for short-term US Treasuries (~80%) and cash (~20%), denominated in US dollars and held directly with major financial institutions. and US custodians within US regulations. scope,” the statement said.
Alluding to rival Tether, which uses different types of assets — US Treasury bills, corporate commercial paper and certificates of deposit issued by financial institutions — to back its stablecoin, Circle said the USDC reserve does not contains “no other high values”. risk, less liquid assets such as digital assets, private or public capital, secured or unsecured loans, [or] commercial paper of any kind or credit rating.
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