Is the FTX Mayhem Impacting Circle’s USDC and Tether? CEOs Denies Rumors

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Last Updated on November 9, 2022 by Bitfinsider

Amidst the commotion surrounding FTX and the Binance acquisition, several rumors about probable contagion consequences are now spreading. If the Binance acquisition fails to materialize, comparable outcomes to the death of Celsius and Terra Luna could ensue.

During this time, other well-known companies, such as Three Arrows Capital (3AC), were brought down or, in the instance of BlockFi, saved just prior to their demise. However, the liquidations caused a cascade impact on the market, causing the price of Bitcoin to fall from $40,000 to $20,000 in the end.

FTX Confusion Raise Questions Regarding Stablecoin Collateral

Colin Wu, a Chinese journalist with the Twitter handle of WuBlockchain, has addressed the suspicions that Circle’s USDC and Tether (USDT) may be implicated in the problem.

On Twitter, he demanded that the CEOs of both stablecoin companies reveal more about their financial ties to FTX and Alameda so that the cryptocurrency community is aware of any potential risks.

As Wu highlighted, on-chain data indicates that a significant number of USDCs are flowing from Circle to FTX. In addition, sources indicate that Alameda is the second largest issuer of Tether. However, Tether CEO Paolo Ardoino dispelled the rumors swiftly.

Source: Twitter

Ardoino continued by elaborating that Alameda had already issued and redeemed a large number of USDT in response to the demand of Tether users. “But no credit exposure has been matured,”  the CEO of Tether stated. At the same time, Ardoino responded to USDT detractors by stating: “Yup. But seems like media for the last 5 years got obsessed by tether only, creating heroes and electing white knights. It turned out that tether was running a tight ship, always being fully collateralized. Media should learn from this lesson too.”

The CEO of Circle, Jeremy Allaire, likewise refuted the rumors without delay. Allaire stated, “Circle has no material exposure to FTX and Alameda.” Additionally, he clarified: “

Circle has never made loans to FTX or Alameda, and has never received FTT as collateral, and has never held a position in or traded FTT. In any case, Circle does not trade on its own account.”

According to Allaire, the Bankman-Fried exchange has been a client of Circle for 18 months, just like any other institutional client. Additionally, both Circle and FTX are small shareholders in the other company. However, Circle is also a small investor in Kraken, Coinbase, and BinanceUS.

Allaire noted that 100% of USDC transactions from Circle to FTX or Alameda depend on automated mechanisms of 1:1 dollar settlement to mint and redeem USDC.

Allaire stated that around 80% of USDC reserves are maintained in U.S. treasury bills with maturities of three months or less, which are held at BNYM.

The remaining cash reserves are stored in fully segregated accounts at seven to eight banks for the benefit of USDC holders. Allaire concluded that there are certificates for anything and everything.

In this regard, the crypto community does not appear to have any cause for concern regarding its most significant stablecoins — at least one piece of good news today. At publication time, the Bitcoin price was below the significant $18,000 threshold.

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