Circle’s huge increase in circulation leads to questions

It’s the most wonderful time of the year, as the song goes. But for many companies it’s the time of the year when they show to the general public, their investors and other interested parties their yearly reports and finance. So it is for Circle USDC, who reported a whooping fall in income over the year of 2021. According to their own reports, only during the third quarter of the year, the losses constituted $138 million.

It wouldn’t have been even worthy of large-scale news making, because many companies and blockchain projects had a rough 2021. Circle, however, stands a little apart because although they report such losses, they have also managed to emit literally billions of USDC tokens, claiming that each one is backed with cash or cash-like assets.

Is the data Circle shares contradictory?

This, of course, begs the question. The practice of money or asset printing is not that uncommon. However, for Circle, it’s something of a league of its own. Only over the first quarter of the year 2021 the quantity of USDC in circulation went up by a smothering 2600%. This is according to Circle’s own report, where they also stated that over 80% of the coins were backed by actual cash and equivalents. On top of that, Circle emitted around 5 billion additional coins in the second half of the year.

Circle is known to side with the US government regulation efforts for stablecoins amidst the increasing concerns and scrutiny with the authorities. On December 8th 2021 Jeremy Allaire, the Circle CEO, claimed during a US Congress hearing that Circle is 100% cash and US Debt backed. The question whether this statement is plausible is still open, as the mechanisms behind Circle’s backing are still unclear, with Circle clearly stating that under the present legislation stablecoins do not have to provide this exact kind of reports. In light of the excessive emission rate, this statement, of course, sounds even more odd.