- Circle CEO Jeremy Allaire has denied that the company is losing billions of dollars a year
- A Twitter user posted a tweet thread decrying the way Circle handles its USDC
- Allaire refuted all the claims, saying the company was in the shape of its life
Circle CEO Jeremy Allaire moved yesterday to calm the nerves of USDC holders after suggestions that the stablecoin was at risk of collapse. USDC is the latest stablecoin to have come under scrutiny following the collapse of Terra’s UST in May, with suggestions that Circle had been exposed to the contagion that has spread through crypto lending platforms. Allaire however refuted these suggestions in a Tweet thread, saying the company had “zero issues”, even with its yield-earning platform.
Circle “On the Brink of Collapse”
Rumours over the solvency of USDC came to a head a week ago when a Twitter used by the name of Geralt Davidson (@CryptoInsider23) claimed that Circle had been “losing money constantly” but that there was “something dirtier happening underneath” and that it was “on the brink of collapse”:
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
Davidson claimed, among other things, that Circle lent USDC out to “high-risk lenders” like Celsius, Blockfi and Voyager Digital, all of which have experienced liquidity issues at differing levels of severity since the Terra and Three Arrows Capital collapse.
Davidson added that a “source” had told him that Circle has already lost $500 million in Q1 2022 on is on track to lose $1.5 billion total in 2022. This means that the company cannot afford to redeem all its USDC tokens for $1.
Allaire Blames “Obvious Confusion” and Paranoia
Allaire responded to these claims with a tweet thread of his own yesterday, saying that he understood why some people were “paranoid” but claiming that there was an “obvious confusion between USDC reserves”, saying that there were two USDC pots – one for users, which is regulated and transparent, and USDC reserved for lending markets “away from Circle”.
Allaire also assuaged any doubt about the yield aspect of USDC:
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.
Davidson wasn’t to be outshone however, and this morning posted a response regarding Circle’s Euro-based stablecoin EUROC, claiming that it has “made some deals with market makers” that will offer a yield as an incentive to boost the market cap, using the “ same tactics as what Circle has done on USDC.”
Whether anything comes from this only time will tell, but it is very ‘in vogue’ to bash anything regarding lending platforms right now, so this could be another case of rumour contagion rather than crypto contagion.