The recent collapse of FTX has caused an error in the financial projections of Circle and USDC.
Circle, the developer of the stablecoin USDC, has explained that the crisis caused by the bankruptcy of FTX and Binance's decision to implement the automatic conversion of USDC to BUSD has caused a error in their financial projections.
The error in the projection was discovered during the S-4 registration statement, a type of document that US companies must file with the US Securities and Exchange Commission (SEC) to report a merger, acquisition or exchange offer.
The S-4 was introduced on November 14, as part of the merger with the capital market company Concord Acquisition. The filing was scheduled for August 2021, but the venture capital firm decided to postpone it to “sometime between October 2022 and January 2023.”
In the presentation, Circle explained that, despite not having correctly evaluated the role of the Binance auto-converts USDC to BUSD, they have seen an increase of approximately $3.000 billion in BUSD from August 17 to September 30.
This figure fits with the USDC in circulation decline from June 30 to September 30.
On the other hand, USDC noted that the $13.500 billion issued since June 30 has meant a 36% reduction compared to the same period of time last year.
Circle and the FTX crisis
Circle has also explained that they had a business relationship with FTX, although this was limited to payment processing by issuing the platform, as it used Circle's payment API.
Jeremy Allaire, CEO of Circle, has also noted that the unique financial impact that has had the fall of FTX in Circle are the 10,6 million initially invested in the exchange.
Allaire also explained that: “the company has suspended its services and transactions with FTX and is assessing the impact on the provision of future services to the FTX Group and the potential financial impact of the FTX Group’s bankruptcy.”
On Twitter, Circle's CEO has explained that they only have a “tiny” equity position in FTX, which does not represent “no material exposure” on the company's balance sheet.
He also explained that Circle has never made loans to FTX or Alameda, who have never received FTT as collateral and who do not have any positions or have ever traded in FTT.
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