In a bear market, as the prices of various tokens begin to plummet, many investors will exchange some of their crypto assets into stablecoins in order to survive this difficult crypto bear market with smaller losses. However, as the market turmoil continues to intensify recently, the stable currency USDC, which has been shining a while ago, has also fallen into a storm of public opinion.
Rumors about USDC in trouble
At the end of June, cryptocurrency trader Geralt Davidson published a long thread about USDC’s troubles, and the main content of the thread was two points:
1. According to an analysis by Geralt Davidson, USDC publisher Circle has already lost $500 million in the first quarter of 2022 and may lose a total of $1.5 billion for the year. In addition, Geralt Davidson said that Circle has also been paying a high interest rate of 5% to an unnamed bank, which may be why Circle has been raising capital over the past few years. Notably, Circle’s USDC reserves were lent by the unnamed bank, making Circle’s business even more strained. Circle also allegedly used an offshore company in Bermuda to facilitate USDC loans to avoid U.S. control and disclosure.
2. Geralt Davidson said that there is a shady part of Circle, which is that USDC has contacted several cryptocurrency companies that are currently facing financial difficulties. USDC is now purportedly lending to high-risk lenders whose clients include Genesis, BlockFi, Celsius, Galaxy, Alameda, and Three Arrows Capital.
As the thread went viral, rumors within the cryptocurrency community that USDC was on the verge of collapse began to intensify.
Circle CEO’s response to rumors
In the face of so much skepticism, Circle founder and CEO Jeremy Allaire tweeted a series of statements and posted an article he wrote in May about transparency and trust in USDC. Here’s what collates the Circle CEO article:
Since its inception, Circle has been committed to making USDC the most transparent and trusted USD stablecoin, and will continue to work on transparency and trust in the future, and will continue to enhance reporting and disclosure through simple, clear, and frequent updates. Here are some facts about USDC:
USDC is fully supported
USDC has always been backed by an equivalent dollar-denominated asset. USDC reserves are managed and held by major U.S. financial institutions, including BlackRock and Bank of New York Mellon. Additionally, USDC reserves are held entirely in cash and short-term U.S. government bonds, including U.S. Treasuries with maturities of 3 months or less.
As of May 13, 2022, USDC reserves consisted of $11.6 billion in cash (22.9%), $39 billion in Treasury securities (77.1%) for a total of $50.6 billion (100%), and $50.6 billion in circulation.
It is worth mentioning that since its launch in September 2018, Circle has issued a monthly certification from a leading global accounting firm that the USDC reserves are worth at least as much as the amount of USDC in circulation, providing the USDC ecosystem with A reputable third-party guarantee. Additionally, USDC’s issuer, Circle, is audited annually, including the USDC Reserve, and the last two audits for 2020 and 2021 have been released as part of Circle’s filings with the SEC as we prepare to list on the NYSE .
Finally, the issuance of USDC is regulated in accordance with U.S. state money transmission regulations, and Circle and its operations are subject to ongoing scrutiny.
USDC can always be exchanged for USD 1:1
Circle customers can always mint or redeem USDC on a 1:1-to-USD basis through their Circle accounts, and customers can mint and redeem almost immediately after funds are settled. Additionally, individual users can exchange USDC for USD globally through digital asset exchanges such as Binance, Coinbase, and FTX.
To provide greater transparency and trust, Circle will provide weekly and daily reports on minting and redemption activity going forward. In 2021, Circle minted $99.3 billion and redeemed $61.1 billion, and in the past 7 days, Circle minted $8.4 billion and redeemed $6.7 billion.
Currently, USDC is supported by thousands of projects and exchanges in more than 190 countries, making it easy for market participants to use and exchange USDC, with a 24-hour USD trading volume of $10.5 billion as of May 13.
According to the information disclosed by Allaire, Circle’s data is normal. Although there is a slight loss, it is not a loss of $500 million as rumored. Of course, the rumor of a loss of $1.5 billion at the end of the year is even more credible.