Jeremy Allaire, co-founder and CEO of global fintech firm Circle, refuted rumors of a potential USDC USDC/USD collapse.
What Happened: Following the recent crypto market crash, Allaire addressed the USDC’s potential de-peg in a series of tweets on July 2. It is "understandable why some users would be paranoid," he said, adding that there are necessary safeguards to prevent any de-peg for USDC.
The firm’s yield was overcollateralized and regulated in order to protect USDC’s peg, he explained.
The rumors surrounding USDC’s price stability stem from their large-scale lend-outs to 3AC, Celsius CEL/USD, BlockFi, and other major crypto firms facing extreme illiquidity.
USDC and Circle work with crypto-focused banks to replace U.S. dollars put into the bank with USDC, which is then lent out. The increased interest rate Circle pays, relative to that paid on regular cash deposits, is causing severe losses to the firm. Despite market conditions and their implications on Circle, Allaire is confident in the security and stability of USDC.
Why It’s Important: There is extreme market anxiety and uncertainty surrounding stablecoins following the de-peg of Terra’s LUNA/USD algorithmic stablecoin UST UST/USD.
Investors across the globe experienced a loss of more than $60 billion. The recent crypto market crash, also caused an outflow of $2 trillion of capital. This worsened the current situation, causing stablecoin issuers to further collateralize their reserves.
As the second biggest stablecoin per market cap, USDC must protect retail and institutional investor confidence amidst turbulent market times. Thus, Allaire’s tweets on USDC’s reserves, collaterals, and transparency seek to reassure USDC investors of price stability and security.
© 2022 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Visit Benzinga's Crypto Homepage - 1,000,000+ depend on Benzinga Crypto every month