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Jeremy Allaire, the CEO of the financial service company Circle, moved to quell rumors that the firm’s USDC stablecoin is on the brink of collapse.
In a Twitter thread published over the weekend, Allaire said he can understand why the crypto community “would be paranoid” about USDC, taking into account the recent collapse of several prominent crypto projects.
“Circle is in the strongest position it has ever been in financially, and we will continue to increase our transparency,” stated the Circle boss.
8/ Circle is in the strongest position it has ever been in financially, and we will continue to increase our transparency. FWIW, we are also encouraged by emerging regulatory frameworks for stablecoin issuers, which should help further increase confidence in issuers like Circle.
— Jeremy Allaire (@jerallaire) July 2, 2022
To back up his words, Allaire also shared Circle’s most recent reports on transparency and trust, audits and attestations, as well as on the state of USDC’s liquidity.
Circle’s CEO remarks come amid rumors that the firm is at risk of defaulting on its USDC reserves due to the large interest payments it must fulfill to crypto-centric banks like Signature and Silvergate.
The stablecoin is also being used in lending activities involving Genesis, BlockFi, Celsius, Galaxy, and Three Arrows Capital (3AC). Each of these crypto firms has been caught up in a liquidity crisis that has rippled across the entire industry.
Circle's USDC scheme is on the brink of collapse. If you read their SPAC IPO filings its clear they have been losing money constantly but theres something dirtier happening underneath. They're at major risk on defaulting on USDC reserves. A deep dive 🧵 on USDC. 👇 pic.twitter.com/GgN5oeD7gO
— Geralt Davidson (@CryptoInsider23) June 29, 2022
Allaire appears to have addressed these rumors head-on, explaining that there is a difference between USDC’s reserves and the actual USDC used in lending markets.
“There is also some obvious confusion between USDC reserves --- which are regulated (where and what we can hold), examined (by regulators and assurance firms), and transparent (weekly flows and composition) -- and USDC that itself is used in lending markets, away from Circle,” wrote Allaire.
7/ On the last point re: Circle Yield, we will share a blog post this week, but the essence is that because Circle Yield is regulated, over-collateralized, offered as a security to only accredited investors, and has a very conservative UW approach, we have had zero issues.
— Jeremy Allaire (@jerallaire) July 2, 2022
He added that Circle would share a blog post this week on Circle Yield—the company’s short- and long-term yield interest rate product built entirely on the USDC stablecoin, stressing that the product in question is both regulated and over-collateralized, and is offered to only accredited investors, with whom Circle ”had zero issues.”
USDC Reserves
Circle, which is eyeing a public listing via a special purpose acquisition company (SPAC), was valued at $9 billion in February this year. In addition to annual audits, the Boston-based firm 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, boasting a market capitalization of $55.8 billion, doubling over the past year and approximately just $10 billion away from market leader Tether (USDT).
Circle insists that the USDC stablecoin “is always redeemable 1 for 1 for US dollars. Any amount. Always. Period,” the firm said in its most recent liquidity statement.
“We can make this assertion confidently because USDC is fully reserved with short-dated US Treasuries (~80%) and cash (~20%), denominated in US dollars, and held directly with leading US financial institutions and custodians within the US regulatory perimeter,” the statement said.
Hinting at rival Tether, which uses different types of assets—U.S. Treasury bills, commercial paper from corporations, and certificates of deposit issued by financial institutions—to back its stablecoin, Circle said that the USDC reserve doesn’t contain “any other high-risk, less liquid assets such as digital assets, private or public equity, loans secured or unsecured, [or] commercial paper of any kind or credit rating.”