Matt Taibbi, a prominent writer and journalist, penned a scathing article warning against investing in stablecoin USDC.
Pointing out that Circle is the only counterparty to the reserve funds, Taibbi explained that Circle’s Reserve Fund will belong to the company, not the coin holders.
Taibbi claimed that when Circle experiences an event of bankruptcy, its customers will be treated as general precarious creditors. It was recently revealed that Coinbase customers were in a similar situation, and the stock market reacted.
How Safe Are USDC Stablecoin Investors?
Taibbi highlights some key risks in the USDC’s registration statement.
An excerpt from the registration statements states that “shares are only Circle Internet Financial; It can be purchased by LLC”.
Taibbi believes such an item is extremely unusual and could have dire consequences for USDC holders.
This clause makes Circle the sole counterparty to the fund, and as a result, in the event of a problem, all funds of the reserve will belong to them.
Taibbi, all bankruptcy related issues cryptocurrency believes the market is the biggest dilemma it faces.
Considering recent events with 3AC, Voyager, and Celsius, whether USDC holders are at risk of bankruptcy is a crucial issue.
According to Circle, the company’s customers are protected by state money transfer laws.
But Taibbi points out that Circle is regulated in states where licensing is required.
Moreover, not every state sees virtual asset activity as a money transfer. Circle also did not disclose the full locations of its reserves and how much value is stored in each location.
*Not investment advice.