It’s an additional headache for Circle as it aims to go public later this year. The company, which got into VC investing in late 2021, is best known for issuing a stablecoin called USD Coin (USDC). The entire stablecoin space finds itself under greater regulatory scrutiny following this year’s collapse of Terra’s terraUSD (UST).
“We are monitoring the current situation,” a Circle spokesperson responded when CoinDesk asked for a comment regarding the Nomad exploit. The statement was repeated when Circle was asked about Slope Finance.
Circle’s ties to Nomad and Slope didn’t cause any financial damage to the company, according to the spokesperson. The investments, however, showed how the interconnections of a growing industry can cast a shadow.
Circle’s USDC, which is pegged to the U.S. dollar, is the second-largest stablecoin, with a $54 billion market capitalization, according to CoinMarketCap data. It trails only Tether’s $66 billion USDT.
Read more: What Is a Stablecoin?
Unlike UST, which was supposed to keep its one-to-one relationship with the dollar via an algorithm tied to another coin, LUNA (issued by Terra), Circle’s USDC pool of assets looks much more plain vanilla.
In a bid to increase transparency, Circle last month released an unaudited reserve report showing that USDC is backed by $42.1 billion in short-term U.S government bonds and $13.6 billion in cash, funds that could be used to stabilize the coin’s peg and ease industry-wide liquidation fears.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.