Jeremy Allaire

Circle and BlockFi questioned on banking with SVB by Warren and AOC

Circle and BlockFi executives were questioned after the lawmakers accused Silicon Valley Bank of “coddling” and giving “white glove” treatment to its largest depositors.

Executives at the stablecoin issuer Circle and the bankrupt cryptocurrency lender BlockFi have been questioned by two members of Congress investigating the so-called “mutual backscratching arrangements” alleged to have taken place with the now-failed Silicon Valley Bank.

On April 9, letters from Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez (AOC) were sent to Circle, BlockFi and 12 other non-crypto tech firms asking a series of questions on each firm’s relationship with SVB.

The lawmakers stated that more needs to be known about SVB’s reported “coddling” and “white glove” treatment towards its largest depositors in order to understand if these firms played a role in SVB’s collapse.

Jeremy Allaire and Zac Prince, the respective chief executives of Circle and BlockFi, were questioned on the length of their financial relationships with SVB and t amounts deposited with the bank, along with what “agreements” were made between their firms.

Senator Elizabeth Warren and Representative Alexandra Ocasio-Cortez’s letter to Circle CEO Jeremy Allaire. Source: U.S. Senate

In addition, the pair wanted to know if SVB offered “perks” such as low-interest rate mortgages or SVB-sponsored “ski trips, conferences and fancy dinners.”

“Congress, bank regulators, and the public are owed an explanation for the bank’s hyper-reliance on tech industry firms and investors,” Warren and AOC wrote.

Related: Polls suggest Elizabeth Warren’s anti-crypto army strategy won’t pay off

They added the extent of SVB’s depositors in the tech industry resulted “in an abnormally high percentage of deposits” not insured by the Federal Deposit Insurance Corporation and questioned the executives on “the role that companies like yours might have played in precipitating the $42 billion single-day-run on SVB.”

“Obtaining information on these factors is important for understanding how SVB failed and how to prevent the next failure,” they added.

Warren and AOC said they believe it may explain why some customers, such as Circle, placed extremely large amounts of uninsured deposits at SVB.

Shortly after SVB collapsed, Circle disclosed that it had $3.3 billion tied up at SVB, while BlockFi was found to have $227 million in uninsured deposits with the bank.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

SEC is not the appropriate regulator for stablecoins: Circle CEO

Circle boss Jeremy Allaire maintains that “payment stablecoins” are payment systems, not securities.

The United States Securities and Exchange Commission is not the appropriate agency to regulate stablecoins, according to Circle founder and CEO Jeremy Allaire.

In an interview with Bloomberg on Feb. 24, the Circle chief executive aired his views on the SEC and its recent moves to clamp down on the crypto industry, including stablecoin issuer Paxos.

Allaire appears to have taken issue with the SEC’s focus on stablecoins, arguing that dollar-pegged “payment stablecoins” should be under the oversight of a banking regulator, rather than the SEC.

“I don’t think the SEC is the regulator for stablecoins,” said Allaire, adding:

“There is a reason why everywhere in the world, including the U.S., the government is specifically saying payment stablecoins are a payment system and banking regulator activity.”

Circle confirmed last week that it had not been targeted by the SEC following the issuance of a Wells notice to Binance USD (BUSD)-issuer Paxos.

“There are lots of flavors, as we like to say, not all stablecoins are created equal,” Allaire said, adding, “But, clearly, from a policy perspective, the uniform view around the world is this is a payment system, prudential regulator space.”

The Circle CEO however said that he was generally in favor of a recent SEC proposal on crypto custody that would make it much harder for exchanges to become custodians.

“We think having qualified custodians that can provide the appropriate control structures and bankruptcy protections and the other things is a very important market structure and very valuable.”

Circle is the issuer of the world’s second-largest stablecoin, USD Coin (USDC). It has a circulating supply of $42.2 billion which gives it a market share of 31%. Tether remains the dominant stablecoin with a supply of $70.6 billion and a market share of 52%, according to CoinGecko.

Related: Why the SEC wants to ban crypto staking and stablecoins under scrutiny

On Feb. 23, Allaire agreed with SEC Commissioner Hester Peirce, who said that the agency should refer to Congress. Due to the lack of legislation, some believe the SEC has been taking things into its own hands concerning crypto regulations and enforcement.

Circle is expanding its headcount by as much as 25%, bucking the general trend of crypto layoffs, the report noted.

Circle’s USDC issuance falls 3 billion from Binance stablecoin conversions

Circle attributed its miscalculated financial projections to Binance implementing USDC to BUSD auto-conversions and the recent collapse of FTX.

Circle, the company behind the issuance of USDC Coin (USDC), said recent events have caused it to miscalculate its financial projections — referring to the collapse of FTX and a decision by rival exchange Binance.

In September, crypto exchange Binance announced it will auto-convert USDC to its own stablecoin Binance USD (BUSD), last week saw the collapse of FTX.

Circle’s 2022 miscalculated projection was noted in its amended S-4 registration statement, which was filed to the United States Securities Exchange Commission (SEC) on Nov. 14.

The S-4 is a registration statement is a document that companies fill out and submit to the SEC before merging, taking over another company or providing an exchange offer.

Circle noted that while they were not able to assess how significant a role Binance’s auto conversion’s from USDC to BUSD played in USDC’s decline in circulation, they observed an approximate $3 billion increase in BUSD from Aug. 17 to Sept. 30, with the firm adding:

“We estimate that up to $3.0 billion of the $8.3 billion decline in USDC in Circulation from June 30, 2022 to September 30, 2022 was driven by the auto conversion by Binance.”

The stablecoin issuer added that the additional $13.5 billion USDC issued since June 30 was a 36% reduction in comparison to 2021.

The first S-4 filing was submitted to the SEC in Aug. 2021, in which Circle planned to merge with capital markets firm Concord Acquisition. However, Concord decided to delay the merger in Oct. 2022 until “no later than Jan. 31, 2023.”

As for its business partnership with FTX, Circle has historically conducted payment processing services for FTX by issuing the now bankrupt trading platform with USDC and being a customer of Circle’s Payment API over the last 18 months, according to Circle CEO and co-founder Jeremy Allaire.

The stablecoin issuer said the financial impact that FTX has had on its balance sheet wouldn’t be any larger than its $10.6 million equity investment, which it will officially address in the next reporting period.

“The Company has suspended its services and transactions with the FTX Group and is in process of evaluating the impact on the provision of future services to the FTX Group and the potential indirect financial impact of the FTX Group bankruptcy,” the filing stated.

Related: Crypto stablecoin issuer Circle adds Apple Pay support

The $10.6 million figure comes as Allaire confirmed in an 11-part Twitter thread on Nov. 9 that Circle only holds a “tiny” equity position in FTX, which represented “no material exposure” on the company’s balance sheet:

Allaire also added that “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.”

Stablecoin issuers Circle and Paxos gain approvals in Singapore

The approvals came after the Monetary Authority of Singapore issued two consultation papers that proposed to ease regulatory hurdles for digital asset service providers.

Stablecoin issuers Circle and Paxos have each received approvals for their respective licenses from the Monetary Authority of Singapore (MAS), the city-state’s central bank.

Circle received in-principle approval for a major payments institution license, allowing it to issue cryptocurrencies and facilitate domestic and cross-border payments, while Paxos received its license to offer digital payment token services.

Circle and Paxos both announced their approvals on Nov. 2, which came a week after the MAS issued two consultation papers on proposals for regulating digital payment token service providers and stablecoin issuers under Singapore’s Payment Services Act (PSA).

The PSA was passed by the Singapore Parliament in 2019, which purports to regulate payment systems and authorizes MAS to oversee the conduct of payment service providers.

Circle, the issuer behind USD Coin (UDSC), and Paxos with its Pax Dollar (USDP), both United States dollar-pegged stablecoins, will now be able to offer their respective stablecoins and other digital payment token products within Singapore.

According to Dante Disparte, Circle’s chief strategy officer and global head of public policy, its approval is set to open up greater potential for cryptocurrencies and open payment systems to drive economic growth in Singapore under the more innovative-friendly regulatory framework.

Co-founder and CEO of Circle, Jeremy Allaire, added the license “in one of the world’s leading financial hubs” will be “instrumental to Circle’s regional and global expansion plans in raising global economic prosperity.”

Paxos Asia CEO Rich Teo was also thrilled with its approval:

“We’re excited to have MAS as our regulator, and with their oversight, we’ll be able to safely accelerate consumer adoption of digital assets globally in partnership with the world’s biggest enterprises.”

Related: Singapore MAS examines crypto firms ahead of new regulations: Report

While it remains to be seen how many more firms will follow Circle and Paxos’ footsteps, the easing in regulations comes as MAS knocked back over 100 out of 170 applicants in late 2021 under the tighter regime.

MAS took things one step further in mid-2022 following the now saga that stemmed from Singapore-based and bankrupt Three Arrows Capital’s (3AC), with chief fintech Sopnendu Mohanty stating that MAS will be “brutal and unrelentingly hard” on “bad behavior” from the crypto industry.

Singapore is fighting to take back its perception of being one of the more crypto-friendly countries. However, it continues to tread with caution for retail investors — with Singapore’s largest bank DBS recently deciding to only expand its crypto trading services to accredited investors who meet strict criteria.

Cointelegraph reached out to Circle and Paxos for comment but did not receive an immediate response.