The United States Securities and Exchange Commission [SEC] has been keenly watching not just stablecoins, but also high-interest crypto-products. In fact, back in September, the SEC also served a Wells Notice to Coinbase for its “Lend” product.
What does the filing say?
Circle’s filing, dated 4 October, is a “proxy statement/prospectus” which detailed its business and various products. Furthermore, the filing disclosed the regulatory action both Circle and its “indirect wholly-owned subsidiary” Poloniex recently faced.
The filing stated,
“In addition, in July 2021, we [Circle] received an investigative subpoena from the SEC Enforcement Division requesting documents and information regarding certain of our holdings, customer programs, and operations. We are cooperating fully with their investigation.”
The filing did not go into the details of the investigation or the nature of the requested documents. However, the filing did hint that Circle would cooperate with regulators in future investigations.
What about Circle Yield?
Circle Yield is a set of “fully secured,” “high yield interest rate products” built on USDC. According to Circle’s website, the 12-month fixed rate is 6.50%. Interestingly, the filing did not imply that Yield is a part of the SEC’s investigation.
Worth noting, however, that Yield bears similarities to Coinbase’s own high-interest crypto-product “Lend,” which earlier came under SEC scrutiny. It is also worth noting that Circle Holdings and Coinbase Global, Inc. formed the Centre Consortium – which in turn developed USDC.
“Coinbase’s high-yield alternative to traditional savings accounts offers 4% APY⁴ on your USD Coin, a stablecoin that can always be redeemed one-to-one for USD $1.00. This means that by lending your USDC to Coinbase, you can earn 8x the national average of high-yield savings accounts.”
Moreover, Circle’s filing added,
“Yield is generated through lending USDC out to centralized (CeFi) blockchain-based lending markets, which offer the ability to earn a higher fixed-term yield than what is currently available in the traditional financial markets.”
It will not be surprising if the SEC finds these ventures to be a major source of concern.