SPAC to square one… Yesterday USDC stablecoin issuer Circle said it was bailing on plans to go public on the NYSE by merging with a special purpose acquisition company, aka SPAC. Circle is well known in crypto circles: its main stablecoin, USDC, tracks the US dollar (1 USDC = $1), and the company says it’s 100% backed by cash and US Treasuries. It’s the second-largest stablecoin by market cap (after Tether) with $43B in circulation. But now Circle’s walking back from its SPAC merger, possibly because it failed to receive the required SEC sign-off.
In love and crypto… timing’s everything. Circle first announced its SPAC plan last year when crypto was booming. Earlier this year, the merger could’ve valued Circle at up to $9B and made it one of the few publicly traded crypto companies. But times have changed:
- TerraUSD, an algorithm stablecoin, blew up in May (unlike “fully reserved” USDC, it wasn’t backed by cash), and crypto prices have plunged further since FTX’s collapse.
- While Circle said it had minimal financial exposure to FTX, the SEC might be hesitant to approve crypto-related deals as it sifts through the bankrupt exchange's wreckage.
Contagion might not spare the strong… Circle's decision to scrap its public debut reflects the radically changed environment it now finds itself in. Some have asked whether the SEC could’ve done more to prevent FTX's loss of billions in customer funds, and officials are pressuring for stricter regulation. That a profitable, regulated, US-based company chose to walk back its billion-dollar debut shows just how far contagion has apparently spread.