Circle, Creator of USDC, Falls Under Investigation By SEC

Circle, one of the founding members of Centre Consortium disclosed in their public filing that they are under an ongoing investigation by the SEC

By
Chung Yee
on
October 7, 2021
Category:
Blockchain News

SEC Enforcement 

Circle disclosed in its public filing on October 4 that they have been subpoenaed by the US Securities and Exchanges Commission (SEC) Enforcement Division for document and information on their holdings, customer programs, and operations.

Circle, the backer for the popular USDC stablecoin became the latest institution to disclose that they too are now subject to an ongoing investigation. This is in respect of their latest crypto lending product called Circle Yield. This product caters to its accredited investors. 

In Circle's public filing to the SEC, the company declared - Yield is generated through lending USDC out to centralized (CeFi) blockchain-based lending markets, which offer the ability to earn a higher fixed-term yield than what is currently available in the traditional financial markets. Circle Yield is offered in the form of a private placement by Circle International Bermuda Limited (“Circle Bermuda”) and subject to oversight by the Bermuda Monetary Authority under Circle Bermuda’s Class F Digital Asset Business license. - Circle's public filing to the SEC, declared
Source : Jeremy Allaire, the CEO of Circle sees crypto asset lending as a potential growth area


SEC Classifies Crypto Lending as a Security 

In early September, Coinbase’s Chief Executive Officer (CEO), Brian Amstrong tweeted that they too have been subpoenaed by the SEC for records. This is in respect of crypto lending product that Coinbase sought to introduce. Jeremy Allaire, the CEO of Circle shares the same sentiment as Brian Armstrong that the US needs more regulatory clarity in his interview with Yahoo Finance. 

Source

The pressure is mounting on the regulators to provide a comprehensive regulatory framework for players that wish to be compliant. There is an increasing demand for crypto lending product to be made available and the intitutions offering access to these products are prepared to comply. 


Selective and Haphazard Enforcement

Gary Gensler the Chair of the SEC told The Washington Post on September 21 that the financial watchdog has ‘robust authority’ to regulate cryptocurrencies. The warning seems to be aimed at those who choose to operate outside the regulatory perimeters. Naturally, the first step is to ensure that the perimeters are clearly drawn. 


Source : Gensler, the SEC Chair maintains his tough stance against non-compliant market operators but the real dilemma lies in a regulatory clarity

This stance by the authorities is becoming increasingly frustrating to the institutional players because the regulatory framework is uncertain and the SEC seems to have its guns trained on trading and lending platforms and at institutional players that wish to comply. 

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Chung Yee

Chung Yee has a legal background and has been involved in research works for the legal and compliance industry. Writing is his passion, centered on topics such as the blockchain and finance. His largest crypto holdings are Solana, Ethereum, and BNB Token.

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