The cryptocurrency market has been experiencing a turbulent period lately, with several companies going bankrupt or going out of business. Voyager Digital announced bankruptcy on Wednesday, becoming the second crypto lender to file for bankruptcy after Three Arrows Capital.
In light of the current market circumstances, Circle has sought to reaffirm its commitment to openness and user safety in a blog post published on Tuesday.. Jeremy Fox, Circle’s chief financial officer, said his company’s priority is to preserve the financial integrity of the system: robust, reliable and secure. He added that other financial institutions offer fraudulent promises to preserve users’ money, only to abandon them when the going gets tough.
1/ With so many firms facing fundamental challenges and risks, Circle has amped up our own information about Circle and USDC. Sharing it here so it’s fresh for people to review. We started publishing these in the days following the Terra collapse. https://t.co/SYNpwYxUif
— Jeremy Allaire (@jerallaire) July 2, 2022
1/ With so many companies facing fundamental challenges and risks, Circle has expanded our own information on Circle and USDC. We share it here to keep it fresh for people to review. We started publishing them in the days following the collapse of Terra
The CFO said Circle’s business model is to minimize risk, not “take and manage risk.” THe also explained how the company protects its USD Coin (USDC) reserves, emphasizing that Circle does not own these assets and that they are 100% owned by USDC holders in segregated accounts labeled “for the benefit of USDC holders.”. Fox wrote:
“Circle cannot use USDC reserves for any other purpose. Unlike a bank, exchange, or unregulated institution, we cannot lend them, we cannot borrow against them, and we cannot use them to pay our bills.”
As a result, in extreme situations like bankruptcy, USD Coin (USDC) is supposedly still redeemable at face value. Also, USDC reserves are completely decoupled from Circle’s other activities, minimizing the risk of them being used to cover other losses.
Circle CEO Jeremy Allaire also recently provided documentation to show that the stablecoin has sufficient liquidity. He posted a lengthy Twitter thread with documents to increase public trust and transparency in the company. The thread followed rumors that Circle had lost billions of dollars by offering wilder incentive programs to various banks, including Silvergate and Signature, to convert cash deposits into the USDC stablecoin..
Some companies have faced liquidity difficulties as a result of the bear market, leading investors to fear that others will join them in the near future. Three Arrows Capital, once a prominent cryptocurrency investment firm, has filed for insolvency, with Celsius also reportedly considering bankruptcy.
USDC is not the only stablecoin in danger
USDC is not the only stablecoin reported to be generating buzz on Twitter. Tether (USDT), the world’s largest stablecoin, has also come under fire with similar claims. Paolo Ardoino, Tether’s chief technology officer, recently said that traditional hedge funds have bet against the stablecoin, hoping it will break off.
Messari: USDC stack continues to rapidly eat market share from USDT: USDC marketcap has risen 8.3% since May, USDT marketcap has dropped 19% to a record low of $66 billion. pic.twitter.com/cRSFFdBT9n
—Alt Crypto Gems (@AltCryptoGems) July 5, 2022
Messari: USDC Reserve continues to rapidly absorb USDT market share: USDC market cap is up 8.3% since May, USDT market cap is down 19% to an all-time low of $66B.
Meanwhile, Circle’s USDC has had a remarkable two months in terms of growth compared to Tether. The USDC market capitalization has risen 8.27% since May, peaking at $55.9 billion on July 2. On the other hand, the USDT market capitalization has fallen 19% to about $65.9 billion.
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