What Happens to USDC Reserves If Circle Goes Bankrupt?
Circle's IPO and rising stock price do not impact the stability of its stablecoin, USDC, according to S&P Global analysts. The IPO does not alter key metrics related to stablecoin stability. Clarity regarding USDC's stability is expected from legislation rather than corporate structure. USDC operates under smart contracts on platforms like Ethereum and Solana, and its reserves are intended to remain intact even if Circle goes bankrupt. However, uncertainty exists about the legal treatment of these reserves in bankruptcy situations, as courts have not established precedents for stablecoin issuers. Circle claims reserves are held in bankruptcy remote accounts, but legal guarantees are lacking. The GENIUS Act aims to provide federal oversight for payment stablecoins and ensure that stablecoin holders have priority access to reserves in bankruptcy. Circle supports these legislative efforts to protect USDC holders.
