The pot calling the kettle black? – Jeremy Allaire, Circle’s CEO, has announced his intention to make the USDC issuer
the first stablecoin operator to be listed on the stock market. He has made a wishful thinking to make his company an example of transparency so that the USDC will establish itself as a benchmark asset and to facilitate Circle’s IPO. Yet during 2021, the company’s disclosures about its dollar reserves have become particularly evasive.
USDC, soon the most transparent stablecoin on the market?
Launched in 2018 as a result of a partnership in Coinbase and Circle, USDC is touted by its issuer as “the future of money transfers”. With $26 billion of USDC in circulation, stablecoin now accounts for over 24% of the stablecoin market. Jeremy Allaire, in a series of tweets
posted on July 8, said Circle would work to increase the transparency of the token, as part of Circle’s transition to public company status. Jeremy Allaire’s posts – Source: Twitter
, Circle has been publishing attestations, provided by Grant Thornton, which look at reserves at a given point in time, but do not provide data as comprehensive as a formal audit.
Until March 2020, the attestations indicated that the USDC was backed by dollars, held by government-approved U.S. depository institutions. However, since the start of the pandemic, these certifications have become more evasive.
For example, Circle claimed that the reserves were held by specialized institutions and composed of “approved investments,” without ever specifying their nature. As of June 2020, Circle again stated that its USDCs were backed by “reserved assets”. According to the
In the case of the International Monetary Fund (IMF), these assets are necessarily currencies, gold or special drawing rights (SDRs), which represent the right to obtain foreign currency or other reserve assets.
Finally, the publication of certificates has slowed down significantly since December. However, the runaway success of the USDC, during the last bull run and fueled byCoinbase’s IPO, has necessarily created some accounting concerns for its issuer.
“Circle intends to become the most public and transparent full reserve stablecoin operator in the market. With the upcoming public filings, and the new USDC reserve certifications, our intention is to provide a detailed summary of USDC reserves.”
Circle’s latest statement as to its reserves mentions cash, cash equivalents and short-term debt. So it appears that its reserves have a similar composition to its main competitor, Tether.
Towards an IPO for Circle
The desire for transparency communicated by Allaire is part of Circle’s IPO process. On July 8, the company announced its intention to go public via the Special Purpose Acquisition Company(SPAC) mechanism. The operation should be carried out through a merger with the SPAC Concird Aquistion, led by Atlas Merchant Capital. According to the Wall Street Journal, the deal would value Circle at $4.5 billion. The IPO is scheduled for the fourth quarter of 2021. Once effective, Circle will become an Irish holding company listed in New York under the ticker “CIRCL”.
As Circle acknowledges, the listing will require the company to meet the most stringent US regulatory accounting standards:
“Not only will all of Circle’s financial accounts be subject to the highest standards of accountability, but ultimately all of these public disclosures will be subject to the standards of the United States’ primary financial regulator, the SEC. “
Stablecoin issuers’ reserves have become a hot topict in the cryptosphere. The New York attorney general concluded in February that Tether’s claim that its reserves were fully backed by dollars was “a lie.” Tether paid an $18.5 million penalty to end the charges without admitting guilt. In addition, the president of the Boston Federal Reserve (Fed) pointed out that stablecoins could pose a threat to the short-term credit market.
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