This article comes from Decrypt, the original author:Max Parasol, compiled by Odaily translator Katie Koo.

, the original author:

, compiled by Odaily translator Katie Koo.

In response to rumors that USDC will repeat the mistakes of Terra, Circle Chief Financial Officer (CFO) Jeremy Fox-Geen accepted an exclusive interview with Decrypt to decipher the mystery of the second largest stablecoin in the market.secondary title

Circle Funding Status

The stablecoin issuer emphasized that its USDC reserves are currently held entirely in cash and 3-month U.S. Treasury bonds, completely independent of the company’s operations. According to the firm’s report, USDC totaled 55,569,519,982 in circulation as of June 30, while reserve assets backing the dollar-pegged token totaled $55.7 billion.

Among them, Circle has US$13.58 billion in cash deposited in regulated US banks, such as Silvergate Bank, Bank of New York Mellon (Bank Of New York Mellon) and Silicon Valley Bank (Silicon Valley Bank). There are currently $42.1 billion in US Treasury bonds.

In an interview with Decrypt, Fox-Geen pointed out that Circle is a financial services company registered in the United States, and it works with Apple's Apple Pay product, PayPal, the mobile payment service Venmo operator, or the Cash App (similar to Alipay) service of the US mobile payment giant Block. and other payment companies operate under the same regulatory framework. Fox-Geen said Circle's operating framework is trusted by the market and adopted by the largest payment companies, protecting billions of dollars in personal accounts.

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Impact of Terra's Thunderstorm and Liquidity Crisis on Circle

Regarding Circle’s losses, Fox Geen stated: “Because Circle is paying rewards to its reserve holders, some of them are using these funds to mint new USDC tokens. The allegations of Circle’s losses are FUD, many of which are not just speculative Sexual and inaccurate. People who make these rumors don’t understand how banks work. Circle doesn’t pay any banks to hold fiat currency. Banks pay customers interest to get fiat currency.”

Even if Circle entered into such an agreement with a bank, it would be fully documented and disclosed in the company's public filings with the SEC, which can be downloaded from the SEC's website, he said. “If it doesn’t exist, it’s because it doesn’t exist. Because if it does, as a U.S. financial services company registered with the SEC, we have to disclose it and face penalties, including individual company executives,” Fox-Geen added “In fact, all of our company’s materials have been documented and fully disclosed,” said Circle’s chief financial officer. However, Circle’s chief financial officer also believes that concerns are warranted in the wake of the collapse of the Terra ecosystem and the liquidity crisis many companies are currently facing. Makes sense, since these companies also often use USDC in their operations.

The industry's latest turmoil began with the collapse of Luna and UST in May, which wiped at least $55 billion of investor wealth from the market. In the weeks that followed, crypto lending firm Celsius froze withdrawals on its platform and eventually filed for bankruptcy, as did crypto brokers Three Arrows Capital and Voyager Digital."We can't lend them money and borrow from them, and we can't use the money to pay bills. According to the currency circulation law, these reserves are kept in separate accounts to protect the interests of USDC customers." According to the U.S. bankruptcy law, USDC reserves Gold has the protections afforded by all other large mainstream payment laws and regulations.

When asked if any crypto lending firm had approached Circle with a request to borrow from its USDC reserves, Fox-Geen said that while he has only been at Circle for 18 months, he has never heard of it happening in the history of stablecoins. Such a thing. He said:

“Circle has always made it clear that USDC reserves cannot be used for any other purpose.”secondary title

Circle Launches Yield Rate Product - Circle Yield

Fox-Geen also emphasized that,

Circle Yield, the firm's short- and long-term yield rate product for institutional investors, may be the first foray into the digital asset market for many of Circle's clients. Circle wants to make sure it is supervised and regulated, and "make sure it takes as little risk as possible."

Crypto lending firms including Celsius and BlockFi have been targeted by the SEC and regulators in New York, New Jersey, Texas and other states since last year, receiving cease and desist letters or paying hefty fines.

It’s worth noting that Circle Yield’s actual regulator is the Bermuda Monetary Authority (BMA), which Fox-Geen claims has helped Circle pass a harsh review.

A core feature of Circle Yield is that the product is said to be fully collateralized by Bitcoin. Fox-Geen emphasized that the product is also overcollateralized, “which is not how most crypto lending businesses work.”

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How does Circle's overcollateralization work?

Fox-Geen explained: “When we lend USDC to our borrowers, the borrowers will provide us with 125% of the value of the loan in Bitcoin held by an independent collateral agency with a well-established security interest. Yes.” If the loan defaults, Circle will be entitled to the bitcoins.

What will happen if the price of Bitcoin falls?

“For example, if the value of Bitcoin drops from 125% to 100% or less, we will issue a margin call to our customers who borrow USDC. Then they will deposit more Bitcoin, and we must put the value of the collateral back. 125%. Likewise, if Bitcoin goes up, they can get some collateral back to keep it at 125%.”

Amid the latest volatility in the cryptocurrency market, Fox-Geen said the mechanism "behaved exactly as expected throughout the process." Margin calls were issued in a timely manner, Circle Yield remained overcollateralized, and clients suffered no losses.

He also admitted that Circle Yield's current interest rate has dropped from an initial 10.75% in November 2020 to 0.5% for short-term and long-term fixed income, which is not very attractive, and there is currently little demand for USDC to borrow. “This is because the laws of corporate finance apply to the digital asset market as they apply to every other asset market. As the market stabilizes, rates will change,” Fox Geen said.

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Circle will be the next crypto company to go public after Coinbase