Circle marks a possible $3B loss 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 or 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 Jun. 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:

5/ Circle is a tiny equity holder of FTX, and FTX is a tiny equity holder of Circle. Circle is also a tiny equity holder of Kraken, Coinbase and BinanceUS.

— Jeremy Allaire (@jerallaire) November 9, 2022

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.”

Related Posts

Digital identity platform integrates with zkSync for on-chain KYC

RNS.ID’s on-chain KYC solution is designed on a “privacy engine” to encrypt users’ data. RNS.id, a digital Web3 identity platform developed to support the application and issuance…

European Central Bank blasts Bitcoin —community responds

After the European Central Bank released a blog post on the shortcomings of Bitcoin, the crypto community on Twitter took to the comments to defend the cryptocurrency….

Ukraine to launch CBDC to fight crisis – Will it be based on Stellar Lumens?

Ukraine plans to make its Stellar-based CBDC to support retail cryptocurrency payments.  Stellar has also been partnering with other countries to develop their CBDCs. The National Bank…

Should you start your crypto trading journey?

Interest in digital currencies has increased considerably during the last couple of years, so the vast world of cryptocurrencies lures more and more individuals. Though, there are…

Cardano partners with 2 industry leaders in Web3 – Will it drive ADA price to $2?

Cardano’s commercial arm EMURGO announced investments in OAK Network and SubQuery protocol to expand its footprint in the Web3. The total number of smart contracts built atop…

Bitcoin, Ethereum Technical Analysis: BTC Moves Above $17,000 on Wednesday

Bitcoin moved to $17,000 on Wednesday, as markets continued to digest the U.S. consumer confidence report. Confidence amongst consumers fell to its lowest level since July, despite…

Generated by Feedzy