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Circle, the issuer of one of the biggest stablecoins USD Coin, is facing a subpoena from the US SEC. The claim itself arose back in July, but the SEC only reported it now.
In July, the Circle team got an “Investigation Summons” from the US Securities and Exchange Commission demanding documents and data about client programs and some holdings and transactions. A little later, the SEC's subpoena was mentioned in Circle's S-4 filing for August 6. Then the company turned to the representatives of the department about the possible "publicity" through the SPAC mechanism and focused on the desire to become a kind of bank. Circle disclosed its intention to merge with Concord Acquisition Corp. The team announced that it is ready to cooperate with the SEC, providing comprehensive data on its activities, if necessary. Although it is not yet entirely clear what kind of information the employees of the US Securities and Exchange Commission intend to focus their attention on.
The subpoena came a month after Circle's involvement with the USDC corporate segment of its high-yielding product, Circle Yield. It was announced as a “regulated” digital currency product licensed in Bermuda. This was shortly before the SEC raised claims against the Coinbase initiative, which announced the launch of its financial instrument with a high yield of 4% per annum Lend, which the exchange hastily abandoned after a threat of legal action.
In the case of Circle's product, profits are generated from USDC lending on blockchain-based Centralized Credit Markets (CeFi). Clients are promised high income with a fixed term, which is more profitable than various offers in traditional financial markets. Therefore, the SEC could have an identical claim against the company, voiced earlier against Coinbase.
In late summer 2021, Circle announced its readiness to pay the US financial regulator $10.4M for the fact that its firm Poloniex functioned as an unregistered crypto exchange. Therefore, this incident was not the first "skirmish" between the company and the SEC.
Meanwhile, USD Coin is the fastest-growing stablecoin with a market capitalization that surged from $3.9 billion to over $32 billion in 2021.
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