Banking turmoil pushes crypto to ‘no oversight,’ says Circle CEO

The ongoing crisis and uncertainty around the global banking system could push the cryptocurrency market into a more gray area in terms of regulation, Circle chief executive believes.

Jeremy Allaire, CEO of the USD Coin (USDC) issuer Circle, took to Twitter on March 23 to share his reflections regarding the market dynamics in the aftermath of the Silicon Valley Bank (SVB) collapse.

In the Twitter thread, Allaire highlighted the “deep market anxiety” about general exposure to the financial system of the United States and the risk of a large-scale U.S. banking system failure.

Circle CEO emphasized that the ongoing banking crisis has a lot more potential to hurt crypto firms regulated in the United States rather than those regulated in other jurisdictions, stating:

“Ironically, the players who have had the strongest position with U.S. regulation and U.S. banking system integration, are considered ‘unsafe’, with fears that assets could be stranded.”

Allaire went on to say that the SVB contagion could potentially drive the crypto market to a less regulated area, urging U.S. policymakers to think about what happens next. Addressing the U.S. White House and the U.S. Congress, the CEO argued that there has been no situation in the past 10 years where the U.S. so urgently needed a “clear, coherent and pragmatic policy.”

“We are in serious risk of seeing an entire strategic technology arena slip away from US leadership,” Allaire warned, adding:

“Right now, market participants are shifting into platforms with no oversight, totally opaque bank and risk exposures, and histories of lax financial risk/integrity controls. This doesn’t end well.”

Allaire stated that Circle will continue operating within a regulatory perimeter and will keep working to add “more transit and settlement banking partners.” He also stressed that USDC “has not missed a beat” and has never failed to mit or redeem USDC for $1, including “during the past weeks stress test.”

As previously reported by Cointelegraph, Circle has experienced major issues due to its exposure to the collapsed SVB bank, with its USDC stablecoin briefly losing its 1:1 peg with the U.S. dollar. The stablecoin subsequently repegged amid Circle announcing Cross River as a new banking partner and expanding ties with BNY Mellon.

Allaire’s remarks have echoed some observations in the cryptocurrency community, with some crypto enthusiasts expressing perplexity over how U.S.-regulated firms like Circle were affected by the crisis, while competitor “chads” like Tether (USDT) have experienced zero to no issues so far.

USDC vs USDT
a short story pic.twitter.com/LyuLgzyNqK

— WhalePanda (@WhalePanda) March 15, 2023

As previously reported, Tether was one of the first companies to deny exposure to SVB and other troubled U.S. banks in mid-March. According to Tether chief technology officer Paolo Ardoino, the stablecoin issuer has no exposure to SVB, Signature Bank or Silvergate.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom