Circle's IPO Doesn't Affect USDC Stability Rating Says S&P Global

Circle, the issuer of the stablecoin USDC, has recently gone public, but this move does not impact the stability rating of USDC, according to analysts from S&P Global. The analysts emphasized that the IPO does not alter the key metrics or issues that are crucial for the stablecoin stability assessment. The clarity that matters most is likely to come from legislation, not corporate structure.

USDC, governed by smart contracts on chains including Ethereum and Solana, is designed to ensure that its reserves would survive the demise of its issuer. However, there is uncertainty regarding the segregation and bankruptcy remoteness of the reserve assets. Bankruptcy remoteness means that certain assets, in this case, the reserves backing a stablecoin, are legally protected so they can’t be used to satisfy corporate debts in the event of bankruptcy.

Circle has stated that reserves are held in bankruptcy remote accounts, meaning they “should remain the property of stablecoin holders, not Circle or its creditors.” However, there is not yet enough legal precedent to guarantee that this would be the outcome in a bankruptcy scenario. Courts have not yet considered the treatment of underlying reserve assets in the context of a stablecoin issuer's bankruptcy or insolvency, and have only issued a limited number of rulings related to digital assets in this context.

Circle, being one of the earliest stablecoin issuers and the first to be listed on the New York Stock Exchange, lacks a similar company bankruptcy to establish legal precedent. Analysts are watching the progress of the GENIUS Act, which would create federal oversight for payment stablecoins and set clear rules for how their reserves are managed. The legislation would amend the U.S. Bankruptcy Code to give stablecoin holders priority access to the cash backing their tokens in the event of bankruptcy.

Circle supports the provisions of the GENIUS Act, stating that these provisions are a critical step toward enshrining in law what they already practice—that stablecoin holders should be first in line, not left in the cold. The legislation aims to make it absolutely clear that if the company fails, the money backing the stablecoin is still safe and redeemable.