Circle Attributes Losses and Bad Projections to Binance Conversions

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The company that backs USDC Coin explained that the miscalculations in its balance sheet are a consequence of recent events in the crypto industry.
Circle had to file a new registration statement with the US SEC clarifying these projections.

Circle, the issuer of USD Coin (USDC), said that the failures in its financial projection calculations were possibly due to Binance’s stablecoin conversions system, resulting in a $3 billion loss on its balance sheets.

The company explained that apart from the automatic conversions of its stablecoin to BUSD, another factor that influenced this error was the resounding crash of the cryptocurrency exchange.

Earlier in the month, Binance had previously announced that it would no longer support trading USDC and other stablecoins on its platform. It would also implement its own automatic conversion system.

Circle’s erroneous financial projections for this year were reflected in the company’s amended S-4 registration statement, filed Monday, November 14, with the US Securities and Exchange Commission (SEC).

This document contains information required by the agency related to the registration of a security or an offering of securities when one company merges with, or takes control of, another.

USDC Circulation Decline

Circle admitted that it did not sufficiently assess the implications and scope of the automatic conversion from USDC to BUSD implemented by Binance. This movement decreased the circulation of USDC, while the increase of BUSD was approximately 3 billion dollars between August 17 to September 30.

Consequently, the firm now estimates that Binance’s automatic conversion caused a USDC circulation decline of $3.0 billion from $8.3 billion during the period of June 30 to September 30, 2022.

Circle added that the additional $13.5 billion USDC issued from June 30 onwards was an effective reduction of 36% compared to last year’s records.

The previous S-4 filing was filed by Circle with the SEC on August 6, 2021, on the occasion of the stablecoin issuer’s merger with Concord Acquisition. But the capital markets firm decided to postpone the execution of the agreement.

Jeremy Allaire downplayed the impact of the FTX crash on the company, beyond the $10.6 million loss Circle had invested in the exchange. The executive said that this will be reflected in the company’s next profit and loss report.

The company also announced the suspension of USDC trading with the FTX Group and promised to carry out an evaluation of the possible indirect financial impact that the bankruptcy of Sam Bankman-Fried’s company caused it.

On the Flipside

However, Circle co-founder and CEO Jeremy Allaire called Binance’s decision to convert stablecoins to dollars a “good thing.”
In a Twitter post on Sept. 5, he predicted that “this move leads to a gradual net share shift from USDT to BUSD and USDC.”

Why You Should Care

USDC is considered the second largest stablecoin in the world, with a market capitalization of $44,401,946,637, according to data from CoinMarketCap. The cryptocurrency this week recovered the loss of parity with the dollar that it had lost along with the other stablecoins.

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