Matt Taibbi is one of our favourite writers here at Equity Mates. The Great Derangement, Griftopia, The Divide, they are some great books on the state of America, its politics and its financial system. Taibbi coined the now famous label for Goldman Sachs, the ‘great vampire squid’ of American finance – “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” – so you can guess where his biases lie when it comes to the financial sector.
In this recent article he writes about the crypto crash and in particular about Circle Internet Financial, the backers of $55 billion USDC, the second largest stablecoin behind Tether.
Circle has been backed by some major financial institutions, including BlackRock and Fidelity in a $400 million funding round in April. Taibbi’s issue with Circle, as opposed to other stablecoin backers, is that in the event of a bankruptcy of Circle, he believes USDC holders may lose their money. The thinking is similar to Coinbase’s recent disclosure that sparked headlines earlier this year, “In the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings and such customers could be treated as our general unsecured creditors.”
USDC challenge his view and have the auditor Grant Thornton reviewing their reserves. So it is important to take Taibbi’s views with a grain of salt, at this stage they are just his views. But after the collapse of the stablecoin Terra earlier this year, it is important to be mindful of anything in the world of crypto that guarantees a return or holds itself out as ‘safe’. Crypto remains a risky asset class, with high potential for loss, and should be treated as such by investors.
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