• Circle has adjusted its treasury reserves to protect against a US debt default.
• The Blackrock-managed Circle Reserve Fund now holds Treasuries maturing no later than May 31.
• USDC stablecoin remains the second-largest stablecoin with a market cap of $30 billion.
Circle Adjusts Treasury Reserves Amid US Banking Crisis
Stablecoin issuer Circle has reportedly taken steps to mitigate the risk of US debt defaults by altering the mix of reserves backing its USD Coin (USDC). CEO Jeremy Allaire stated on May 10 that the company is transitioning to short-dated US Treasurys and no longer holds Treasuries with maturities beyond early June. This move is intended to minimize potential involvement in a US debt default, should Congress fail to raise the federal debt limit.
Blackrock-Managed Circle Reserve Fund
The Blackrock-managed Circle Reserve Fund now holds holdings maturing no later than May 31, as revealed in a quarterly assurance report released on May 10. Treasury Secretary Janet Yellen recently warned that the government would have to make “decisions” if Congress fails not raise the borrowing limit, which could lead to significant disruption and chaos in the global financial system if it were unable to pay its debts.
Rival Tether Reducing Bank Deposit Reliance
Tether, another stablecoin issuer, claims that most of its reserves are invested in Treasury bills with an average maturity of fewer than 90 days. The firm has also been working towards reducing reliance on pure bank deposits as sources of liquidity.
USDC Supply Decreasing Over Past Year
Over the past year, there has been a 46% decrease in USDC supply from its all-time high of $56 billion in June 2022 and its market share has dropped by 23%. In contrast, rival Tether’s market dominance increased over this time period and now stands at 62%, with a circulation of $82 billion USDT (USDT).
Circle Launches Cross Chain Transfer Protocol for USDC
Notably, Circle recently launched a cross-chain transfer protocol for $USDC via Ethereum and other EVM-compatible chains. Despite turbulent times since March 2023 when it lost its peg leading to significant withdrawals from USD Coin resulting in a 25% market cap drop, USDC remains the second largest stablecoin with $30 billion circulation value.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.