What is USDC?
USDC is an asset-backed payment token created by Circle Internet Financial, LLC (Circle). USDC is available on multiple blockchains, but Wealthsimple only supports the ERC-20 token version of USDC on the Ethereum blockchain. USDC is designed to maintain a price in secondary markets of $1 USD for each USDC token.
Circle states that USDC is fully backed by an equivalent amount of U.S. dollar-denominated assets held by Circle in segregated accounts, on behalf of, and for the benefit of, USDC holders. According to Circle, for every USDC token remaining in circulation, Circle holds on behalf of USDC holders U.S. dollar denominated assets in the Circle Reserve Fund and in segregated accounts held by Circle with U.S. financial institutions on behalf of USDC holders. The Circle Reserve Fund is a government money market fund consisting of short-dated U.S. Treasuries and cash, is custodied at The Bank of New York Mellon and is managed by BlackRock. Segregated accounts are unencumbered accounts at U.S. regulated financial institutions, including The Bank of New York Mellon, holding cash on behalf of USDC holders that are segregated from other accounts of Circle, including general corporate funds.
On a monthly basis, Circle publishes attestation reports issued by an independent third-party accounting firm regarding the fair value of assets held in the USDC reserve and the number of USDC tokens in circulation. Circle also publishes current information regarding the amount and composition of USDC reserves. These reports and other information are available on Circle’s Transparency web site.
Although USDC may be commonly referred to as a “stablecoin”, there is no guarantee that USDC will maintain a stable value in relation to the value of the reference asset when traded on secondary markets or that the reserve of assets will be adequate to satisfy all redemptions.
Before trading any crypto assets it is important to understand the risks. This overview is a starting point for you to perform your own research prior to investing in a crypto asset. First and foremost:
No securities regulatory authority or regulator in Canada has evaluated or endorsed the Crypto Contracts or any of the crypto assets made available through the platform.
Wealthsimple has performed an assessment of whether USDC can be supported by Wealthsimple’s platform, including whether USDC is a security and/or a derivative and is being offered in compliance with securities and derivatives laws.
We evaluated USDC based on publicly available information, including (but not limited to):
- The creation, governance, usage and design of USDC, including the source code, security and roadmap for growth in the developer community and, if applicable, the background of the developer(s) or issuer(s) that first created USDC;
- The supply, demand, maturity, utility and liquidity of USDC;
- Material technical risks associated with USDC, including any code defects, security breaches and other threats concerning USDC and its supporting blockchain (such as the susceptibility to hacking and impact of forking), or the practices and protocols that apply to them;
- Legal and regulatory risks associated with USDC, including any pending, potential, or prior civil, regulatory, criminal, or enforcement action relating to the issuance, distribution, or use of USDC;
- The stability, resilience, and structure of the stablecoin; and
- Statements made by regulators or securities regulatory authorities in Canada and other jurisdictions regarding whether USDC, or generally about whether the type of crypto asset, is a security and/or a derivative.
Wealthsimple monitors ongoing developments related to crypto assets available on its platform for significant changes that may affect Wealthsimple’s original assessment of those assets, including Wealthsimple’s assessment of the application of securities and derivatives laws. Any significant changes relating to USDC may result in changes to this Crypto Asset Statement and/or Wealthsimple’s ability to support USDC.
Like all other crypto assets, there are some general risks to investing in USDC. These include short history risk, volatility risk, liquidity risk, demand risk, forking risk, cryptography risk, regulatory risk, concentration risk, electronic trading risk and cyber security risk. Please review the Wealthsimple Crypto Product Risk Disclosure for additional discussion of general risks associated with the crypto assets made available through the platform.
Additional Risks / Information
Value-referenced crypto assets (VRCAs) such as USDC present risks distinct from other crypto assets. The mechanism by which a stablecoin seeks to maintain its value is not guaranteed and can present systemic market risk, capital risk, and security risk. USDC’s reserve assets are held at insured financial institutions but USDC accounts themselves are not insured and thus USDC holders do not have an insured claim to their USDC. A VRCA such as USDC is not the same as and is riskier than a deposit in a bank or holding cash with a crypto trading platform.
Wealthsimple uses liquidity providers to execute purchases and sales of USDC. Wealthsimple does not have a direct redemption right for USDC with Circle and cannot redeem USDC with Circle on your behalf. You may not be eligible to redeem USDC with Circle.
Due to uncertainties in the application of bankruptcy and insolvency law, in the event of the insolvency of Circle, there is a possibility that creditors of Circle would have rights to the reserve assets that could outrank a USDC holder’s rights, or otherwise interfere with a USDC holder’s ability to access the reserve of assets in the event of insolvency.
The secondary market trading value of USDC may deviate from par with USDC in certain circumstances, such as:
- temporary or permanent suspension of redemptions of USDC by Circle;
- unexpected delays in processing redemptions of USDC by Circle;
- general volatility or illiquidity in secondary trading markets for USDC; or
- outages or other circumstances affecting Wealthsimple’s liquidity provider’s willingness or ability to buy and sell USDC.
In March 2023, the price of USDC on Wealthsimple’s platform materially deviated from par primarily due to market disruption caused by the collapse of Silicon Valley Bank, where a portion of USDC's reserves were held. Wealthsimple temporarily suspended trading of USDC.Circle, the issuer of USDC, sought to reassure the market by stating that liquidity would remain unaffected and that they would replenish reserves as needed. Shortly after Circle’s statement, USDC regained its 1:1 peg to the US dollar and Wealthsimple resumed trading of USDC.
The Canadian Securities Administrators have stated that VRCAs such as USDC may be securities and/or derivatives under applicable securities laws. To the extent that USDC has not been distributed in compliance with securities laws, you may be subject to additional risks, such as the risks that material facts and material changes relating to USDC have not been disclosed.
We emphasize that this Crypto Asset Statement is not exhaustive of all risks associated with trading USDC. Investors should perform their own assessment to determine the appropriate level of risk for their personal circumstances.
Wealthsimple is offering Crypto Contracts in reliance on a prospectus exemption contained in the exemptive relief decision Re Wealthsimple Investments Inc. dated December 18, 2023 (the Decision).
The statutory rights of action for damages and rescission in section 130.1 of the Securities Act (Ontario), and, if applicable, similar statutory rights under securities legislation of other jurisdictions of Canada, do not apply in respect of this Crypto Asset Statement to the extent a Crypto Contract is distributed under the prospectus relief in the Decision.
Last updated: January 1, 2024