Circle marks a possible $3B loss from Binance stablecoin conversions

Circle, the company behind the issuance of USDC Coin (USDC), said recent events had caused it to miscalculate its financial projections – referring to the collapse of FTX and a decision to rival Binance exchange.

In September, crypto exchange Binance announced that it would automatically convert USDC into its own stablecoin Binance USD (BUSD), last week saw the collapse of FTX.

Circle’s erroneous projection for 2022 was noted in its amended S-4 registration statement which was filed with the United States Securities Exchange Commission (SEC) on November 14.

The S-4 is a registration statement is a document that companies complete and submits to the SEC before merging or taking over another company or making an exchange offer.

Circle noted that while they were unable to assess how much of a role Binance’s automatic conversion of USDC to BUSD played in lowering USDC circulation, they did. observed an increase of approximately $3 billion in BUSD from August 17 to September 30, the company adding:

“We estimate that up to $3.0 billion of the $8.3 billion USDC decline in circulation from June 30, 2022 to September 30, 2022 was driven by automatic conversion by Binance.”

The stablecoin issuer added that the additional USDC$13.5 billion issued since June 30 represents a 36% reduction from 2021.

The first S-4 filing was submitted to the SEC in August 2021, in which Circle planned to merge with capital markets firm Concord Acquisition. However, Concord has decided to postpone the merger to October 2022 until “no later than January 31, 2023”.

Concerning its business partnership with FTX, Circle has historically provided payment processing services for FTX by issuing the now-bankrupt trading platform with USDC and being a client of Circle’s Payments API at during the last 18 months, according to Circle CEO and Co-Founder Jeremy Allaire.

The stablecoin issuer said the financial impact FTX has had on its balance sheet will not be greater than its $10.6 million equity investment, which it will formally process during the next reporting period.

“The company has suspended its services and transactions with FTX Group and is in the process of assessing the impact on the provision of future services to FTX Group and the potential indirect financial impact of the bankruptcy of FTX Group,” the statement said. case.

The $10.6 million figure comes as Allaire confirmed in an 11-part Twitter thread on Nov. 9 that Circle only holds a “tiny” stake in FTX, which represented “no material exposure” to the company balance sheet:

5/ Circle is a small shareholder of FTX, and FTX is a small shareholder of Circle. Circle is also a small shareholder in Kraken, Coinbase, and BinanceUS.

— Jeremy Allaire (@jerallaire)

Go too added that “Circle has never made loans to FTX or Alameda, and has never received FTT as collateral, and has never held a position or traded in FTT.”