The crypto bear market has dragged many platforms to their knees, while most of the assets have plunged hard by nearly 90% from their highs. Bitcoin specifically dropped heavily from $69,000 amid the correction and slashed heavily from $45,000 to as low as $17,600 due to a couple of crashes led by the lending platforms. The popular stablecoin USDT had also shaken up as USDC emerged as the trader’s desired asset.
However, the USDC’s future also appears to be in distress as a major problem may arise for the parent company Circle!
Matt Taibbi, an American author, and journalist reporting on finance, politics & sports, recently pointed out an upcoming disaster for the crypto space. The author had closely followed the recent crypto crash for a month and believes that major trouble is awaiting USDC & Circle.
The author in his recent article reveals that the Reserve Fund of Circle belongs to the company and not the holders. And hence yet another Coinbase-like wreckage may be fast approaching.
Will USDC’s Holders be Treated as Unsecured Creditors?
Circle, amid the current uncertain market environment, has stated their customers to be protected by laws. But one of its unusual clauses in the USDC registration statement states, “shares are only available for purchase by Circle Internet Financial: LLC”, which could have a bad consequence for USDC holders.
While the crypto space is still not copped up with the recent events related to LUNA-UST, Celsius, 3AC and now Voyager, a minor issue with Circle may cause huge damage to the USDC holders. No doubt Circle is regulated and licensed but has not revealed the location of its reserves and the amount of reverse stored in each location.
Therefore, the clause is presently making the company the sole counterpart of the fund while all the reserves belonging to them, non-disclosure of reserves’ location and the amount stored may raise huge concerns of a probable liquidity crisis ahead.
On the other hand, Circle has drastically dropped the interest rates from 10.75% to as low as 0.5% for a 12-month term. Additionally, its claim of providing the highest returns to traditional fixed-interest returns is no longer applicable. No doubt the Circle’s CEO, Jeremy Allaire says that the company is regulated, and over-collateralized with zero issues, these concerns may land them in trouble soon.