Regulatory Uncertainty and Banking Crisis Could Push Investors Outside the US: Circle CEO

Jeremy Allaire – CEO of Circle Internet Financial Ltd. – argued that US investors could soon relocate due to the lack of proper regulations and the growing banking crisis.

The collapse of Silicon Valley Bank (SVB) in March caused severe issues for the stablecoin issuer. USDC de-pegged from its $1 fixed valuation to as low as $0.87 after Circle revealed a massive $3.3 billion exposure to the financial institution. However, it coped with the problem, assuring that investors won’t be affected.

‘Critical Moment’ in the US

In a recent interview for Bloomberg, Allaire suggested that America’s regulatory challenges and shaking banking system could prompt investors to “de-risk out of the US:”

“We are seeing a huge amount of concern globally about the US banking system. We are seeing concern about the regulatory environment in the US.”

The numerous catastrophes last year, including the Terra crash and the FTX meltdown, have left a dark stain on the entire cryptocurrency field, whereas many believe those events happened due to the lack of proper supervision. 

Allaire thinks the US government should act quickly, highlighting the progress that the European Union, Singapore, and Hong Kong have achieved lately:

“It’s a critical moment here in the US, and, as I like to say, it’s really a moment for Congress to step up.”

Another well-known individual from the crypto industry who supports that thesis is Coinbase’s CEO – Brian Armstrong. He recently hinted that his exchange could go offshore unless the American watchdogs impose pertinent rules on the digital asset sector. 

USDC and SVB

Besides the regulatory hurdles, Circle’s CEO mentioned the banking problems of the world’s strongest economy and the impact on investors and other entities.

The domestic authorities shut down three leading banks last month: Silvergate Capital, Signature Bank, and Silicon Valley Bank. They all served multiple cryptocurrency clients and triggered substantial losses for them.

First Republic also struggled a lot, and despite the government interference, its Q1 earnings report was weak, pushing its stock south by over 50% yesterday at one point. 

Circle, however, had a whopping $3.3 billion exposure to SVB, which led to investor panic, causing USDC to fall way below its $1 price target. 

Despite the problems, the Boston-based organization assured it continues the normal course of its operations, outlining that clients won’t be affected:

“Circle, as required by law and under stored-value money transmission regulation, will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”

The stablecoin restored its $1 valuation in the following days and has not registered any wobbles since then. Nonetheless, its market capitalization took a major punch, tumbling from over $43 billion in March to around $30 billion as of now.

Featured Image Courtesy of AIR