Circle USDC: Be better than Tether. Don’t talk about transparency, show transparency.

7 min readJul 6, 2021


In 2014, when Tether first made their announcement to the market, I have no doubt in my mind that the idea behind Tether was not to commit fraud. It wasn’t to launder money.

Tether’s goal was to try and solve a problem in bitcoin, a problem with exchanges playing games with withdrawals. Tether could obtain legitimate banking for the bitcoin exchanges, and Bitcoin exchanges wouldn’t need to worry about banking anymore. They’ll just use Tether. Tether deals with all of the compliance, KYC/AML for them… at least that was the idea.

But in the case of Tether, what they didn’t seem to anticipate is that they would just be exporting crypto exchange banking problems to themselves, and then have to engage in all sorts of funny business to give the illusion of prosperity and security and legitimacy.

What started out as a legitimate project eventually evolved into a complete and total fraud, with bank fraud and money laundering to boot.

Just like with Tether, Circle’s USDC platform started out with great intentions. Tether set a very low bar for Circle USDC to beat. A legitimate stablecoin would provide traders with a safer place to store their money. USDC promised transparency and attestations, and they have provided monthly attestations for years, but transparency, not so much anymore.

Those attestations have shown that Circle’s USDC platform is unable to resist the temptation that Tether itself has exposed itself to, to play games with the reserves.

Let’s take a look at one the first available attestations for Circle’s USDC platform:

October 2018 Attestation

While the attestation is not an audit, it is at least something, and I’d trust this more than Tether’s “Deltec” attestation because I believe iFinex/Tether is a shareholder in Deltec.

This attestation does not leave much wiggle room with respect to their reserves, it’s strictly US dollars held in custody accounts. Quite simple and easy for everyone to understand.

Only US Dollars held in custody accounts. Good.

Where things start to go wrong with USDC.

In March of 2020, Circle USDC provided us with the February attestation. The attestation stated the following:

Still no ambiguous language to be seen here. Good.

As you can see, there’s still no wiggle room. USDC is backed by USD in a bank account at US depository institutions. Still looks good to me.

However, after March 2020, when Bitcoin suddenly fell 40–50% during the Coronavirus panic, Circle USDC added some new ambiguous language and wiggle room. “Approved Investments”.

It’s a pretty neat coincidence that they’ve done this right after a massive crypto currency market crash.

It’s also a very neat coincidence that the issuance of USDC skyrockets over the next year with this language as well.

What are the approved investments? Surely it’s only US treasury bills and safe investments, right? The problem with that, if that was the case, they could just say Cash & Cash equivalents/Treasuries, like what Paxos is currently doing:

No ambiguous language. Cash & US treasuries. Good.

So clearly, “approved investments” is more than just treasuries and cash. We need to know what they are.

Jeremy Allaire was asked about the “Approved Investments” on a Coindesk interview, unfortunately, he completely dodged the question and refused to answer it with anything resembling a straightforward answer.

Scroll to 8:28 for the “approved investments” answer.

Instead, Jeremy tells people wondering to “look at the laws” about what governs what money transmitters can invest reserves in.

Unfortunately, different states have different rules regarding what they can invest their reserves in, and some states have no restrictions at all. Circle has money transmitter licenses in multiple states, and in theory could just operate in the state with the least amount of restrictions.

So, this is a non-answer. Dodging questions about reserves should set off alarm bells, the same alarm bells that set me off about Tether.

Worst of all, he then states that if USDC was fractionally reserved like people are saying, “I’d be in jail”. This is one of his most alarming comments to me, because his competitor, Tether has literally been caught in a bank fraud/money laundering scandal where they handed nearly a billion dollars to a now indicted criminal enterprise currently being prosecuted, and has had former executives (Phil Potter), admit to bank fraud and money laundering, and so far, none of them are in jail, yet.

You can trust me, because if I was doing something illegal I’d be in jail.

That being said…

Circle USDC still has time to come clean about what their reserves actually are. I am not going to accuse them of fraud or doing anything illegal, right now their primary offense to the crypto community is lack of transparency.

It’s a problem that they can fix tomorrow.

I want to see them be transparent. I want to be able to see the reserves and put this issue to bed, just like I wanted Tether to be transparent. Tether refused to be transparent, it required a two year NYAG lawsuit for them to produce a single page worthless pie chart.

Circle’s USDC has an excellent opportunity to show that they are in fact better than Tether, and are fully invested in safe assets that aren’t anchored to the crypto currency market.

The BIG Questions for USDC

1. Are cryptocurrencies part of the “approved investments” for USDC?
2. Are bonds in crypto based companies (traders, exchanges, miners), “approved investments” for USDC?
3. When will USDC provide a full breakdown of their reserves showing that they’re only invested in safe investments, akin to what the Fidelity SPAXX publishes? This will resolve all of the complaints I have regarding USDC.

4. The Fidelity SPAXX is capable of being audited, so USDC is capable of being audited. When will USDC conduct an audit of their reserves? For example, to prove that there was no cryptocurrency speculation going on with the reserves.
A breakdown of the “approved investments” for March 2020 and April 2020. Did Circle make emergency loans to traders to intervene in the crypto currency markets in March of 2020?

In my opinion, failure to adequately answer these very simple questions, will lead me to suspect that Circle’s USDC product is not safe, and I’ll have no choice but to advise that people stay away from this product and all of Circles businesses, much like I advise people to stay away from Tether and Bitfinex and everything that touches them.

We’d like to be perfectly clear, too.

You can’t claim to be transparent, if you’re unwilling to be transparent about your reserves. If the Fidelity SPAXX can be fully transparent, but you can’t be transparent about your reserves, your product is worse than what already exists in the markets today by orders of magnitude. The SPAXX is more transparent and passes through the interest.

Hiding behind “we publish what is required”, isn’t going to pass the smell test. Don’t talk to us about transparency that is worse than the traditional finance sector.

Be better, Circle. It’s not illegal to show people what you’re holding.

You’re holding other people's money, and other people’s livelihoods and families are dependent on you, and they deserve to know what the hell they’re holding.

Publish the reserves.

It’s really not that hard. The only reason why Circle USDC would not want to be transparent about their reserves, is if their reserves are in high risk, or even junk assets (such as MicroStrategy bonds).

If they are in assets tied to the cryptocurrency sector, borrowers that may not be able to pay back the loans if crypto currency crashes, your crypto safe haven assets aren’t safe, either.

They’re leveraged on the same thing you’re trying to protect yourself against.

If Circle USDC fails to produce a breakdown of their reserves similar to what we see with SPAXX, then it’s a safe assumption that the reserves are high risk.

For an example of how Circle USDC could be transparent, be sure to read my previous blog on this subject. This is information that Circle USDC has right now.

It literally shouldn’t take more than thirty days to publish a version for the public.

You can do it Circle USDC.

Trade carefully.




Blog for @Bitfinexed on Twitter. Exposing possible fraud by largest Bitcoin exchange, Bitfinex/Tether