The crypto bear market has pulled many platforms to their knees while most assets have fallen by almost 90% from their highs. Bitcoin notably fell heavily from $69,000 amid a correction and a low from $45,000 to $17,600 due to some crashes led by the lending platform. Popular stablecoin USDT was also shaken up as USDC emerged as the trader’s desired asset.
However, the future of USDC also appears to be in jeopardy as a bigger problem could arise for parent company Circle!
Matt Tauby, an American author and journalist reporting on finance, politics and sports, recently pointed to an impending disaster for the crypto space. The author closely followed the recent crypto crash for a month and believes that bigger trouble awaits USDC and Circle.
The author has revealed in his recent article that the Reserve Fund of Circle belongs to the company and not to the holders. And so yet another Coinbase-like wreck is fast approaching.
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Will holders of USDC be treated as unsecured creditors?
In the midst of the current uncertain market environment, Circle has asked its customers to be protected by laws. But an unusual section in the USDC registration statement states, “Shares are available for purchase only by Circle Internet Financial: LLC”, which could have dire consequences for USDC holders.
Although the crypto space is still unable to cope with the recent developments related to LUNA-UST, Celsius, 3AC and now Voyager, a minor problem with Circle could cause huge losses to USDC holders. There is no doubt that Circle is regulated and licensed but has not disclosed the location of its stores and the amount of reverse stored in each location.
Therefore, the clause currently making the company the sole counterparty of the fund, all the reserves relating to them, non-disclosure of the location of the reserves and the amount stored could raise major concerns of possible liquidity crisis ahead.
Also read: Is Circle’s USC Coin (USDC) Becoming a More Preferred Stablecoin Than Tether (USDT)?
Circle, on the other hand, has reduced the interest rates from 10.75% to 0.5% for a period of 12 months. Additionally, its claim to provide the highest return for traditional fixed-interest returns is no longer applicable. There’s no doubt that Circle’s CEO, Jeremy Allaire, says that the company is regulated, and has more collateral with zero issues, concerns that could soon land them in trouble.