The U.S. Securities and Exchange Commission (SEC) has opened an investigation into Circle. The matter is described in the documents, published on October 4.
The company reported regulator interest in August, but the information went largely unnoticed.
According to the new Form S-4, in July 2021 Circle received a subpoena ordering it to provide ‘documents and information regarding certain assets, client programs and operations’.
Circle stressed that it is ‘fully cooperating’ with the SEC in the investigation. The documents do not specify its scope or details.
Circle closed a financing round of $440 million. Investments were provided by FTX, Digital Currency Group, Fidelity Management, Valor Capital Group and other venture capital firms.
In July it became known that Circle planned to go public through a merger with SPAC Concord Acquisition Corp.
Around the same time, the company disclosed information about the backing of the stablecoin USDC, the issuer of which is the Centre consortium, managed by Circle in partnership with the Coinbase cryptocurrency exchange. Most of the ‘stablecoins’ are backed by US dollars, the rest by bonds and other highly liquid assets.
The USDC reserves were later promised to be converted into dollars and U.S. Treasuries.
In August, Circle’s chief executive, Jeremy Allaire, said that Circle would become a ‘commercial cryptocurrency bank with full reserves’. Its activities would comply with the requirements of the Fed, the U.S. Treasury, OCC and FDIC.
Last summer, the development of a regulatory framework for stablecoins was urged by U.S. Treasury Secretary Janet Yellen.
Chairman Gary Gensler described stablecoins as ‘poker chips in a Wild West casino’, and Senate lawmakers have called for full cash backing of these digital assets.
In October, sources at The Wall Street Journal reported that the Biden administration was examining the possibility of including stablecoin issuers under the regulatory framework. They could be subjected to the same requirements used to regulate the banking industry.
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