Matt Taibbi, a notable author, and journalist wrote a scathing article warning against investing in USDC. Pointing to the Circle being the sole counterparty to its reserve funds, Taibbi revealed that Circle’s Reserve Fund would belong to the company and not its holders.
Taibbi believes that Circle could cause the same kind of market wreckage as COINBASE when it revealed that customers would be treated as general unsecured creditors in the event of bankruptcy.
How Protected Are USDC Holders?
Taibbi highlights some major red flags in USDC’s registration statement. A quote in the registration statements says, “shares are only available for purchase by Circle Internet Financial; LLC”.
Taibbi believes such a clause to be extremely unusual and one that can have bad ramifications for USDC holders. The clause makes Circle the sole counterparty to the fund, and as a result, all the reserve’s funds would belong to them.
Taibbi believes the issues surrounding bankruptcy to be the major dilemma facing the entire cryptocurrency market. Considering the recent incidents with 3AC, Voyager, and Celsius, whether USDC holders bear bankruptcy risk is a very important issue.
