Circle looks to reaffirm commitment to transparency as USDC market share soars

Published at: July 6, 2022

The cryptocurrency market has experienced a turbulent period as of late, with several firms filing for bankruptcy or shutting down. Voyager Digital announced its bankruptcy on Wednesday, becoming the second crypto lender to default following Three Arrows Capital.

In the light of present market circumstances, Circle has sought to reaffirm its commitment to openness and user security in a blog post published on Tuesday. Jeremy Fox, the chief financial officer of Circle, said that his firm's priority is to preserve the financial integrity of the system — robust, trustworthy and safe. He added that other financial institutions offer fraudulent promises of preserving user 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

The chief financial officer said that Circle's business model is to minimize risk, not “taking and managing risk.” He also explained how the firm protects its USD Coin (USDC) reserves, emphasizing that Circle does not own these assets and that they are 100%t owned by USDC holders in segregated accounts labeled "for the benefit of USDC holders." Fox wrote:

"Circle is not allowed to use the USDC reserves for any other purpose. Unlike a bank or an exchange or an unregulated institution, we cannot lend them out, we cannot borrow against them, and we cannot use them to pay our bills."

As a result, in extreme situations like bankruptcy, the USD Coin (USDC) is purportedly still redeemable at face value. Also, the USDC reserves are completely disconnected 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 demonstrate that the stablecoin has sufficient liquidity. He published a lengthy Twitter thread with papers to increase public confidence and transparency in the firm. The thread followed rumors that Circle had lost billions of dollars by offering wilder incentive programs to several banks, including Silvergate and Signature, to convert cash deposits into the USDC stablecoin.

Some firms have faced liquidity difficulties as a result of the bear market, making investors fearful that more will join them in the near future. Three Arrows Capital, once a prominent cryptocurrency investment firm, has been deemed insolvent, and Celsius is also said to be considering bankruptcy.

USDC not the only stablecoin underfire

USDC isn't the only reported stablecoin generating buzz on Twitter. Tether (USDT), the world's largest stablecoin, has also been slammed with similar claims. Paolo Ardoino, Tether's chief technology officer, recently said that traditional hedge funds have bet against the stablecoin, with the hope that it will depeg.

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

Meanwhile, Circle's USDC has had a notable two months in terms of growth when compared to Tether. The USDC's market capitalization has increased by 8.27% since May, reaching a peak of $55.9 billion on July 2. On the other hand, USDT's market capitalization has tumbled by 19% to around $65.9 billion.