Returning to how its USDC stablecoin was collateralized, Circle indicated that it would like the FED to keep some of its reserves. Despite everything, there is still a long way to go before we get there.
Towards a Fed-secured USDC?
This week, Circle returned to the collateralization of USDC liquidity, and indicated that it would like that a portion thereof be stored with the United States Federal Reserve (EDF).
In fact, this is a long-term ambition, but it takes a long way in terms of regulation :
“We have always aspired to hold the cash portion of the USDC reserve directly with the Federal Reserve, realizing our vision of USDC as a true token currency. This will require stablecoin legislation. Since Circle’s founding in 2013, we’ve been at the forefront of calls for regulation […], and we are optimistic about action by Congress. »
The part concerned is cash that is held directly in dollars. It is this same percentage, part of which had been temporarily blocked in the bankruptcy of Silicon Valley Bank (SVB), causing a depeg of the stablecoin for a weekend before returning to normal on Monday.
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Transparency on reservations
Waiting for a screenplay where the USDC would be dubbed by the FED, Circle takes other steps to store such reservations. Bank of New York Mellon (BNY Mellon) thus manages almost all of this percentage in cash.
The bank is one of 30 Global Systemically Important Banks (GSIB) identified in 2022 by the Financial Stability Board (FSB), namely banking institutions whose importance is such that failure would lead to systemic risk: the famous “to big to fail”.
In addition, BNY Mellon also holds short-term US Treasuries and these are managed by BlackRock. These bonds constitute the major part of this collateralisation, i.e. nearly 89% as of March 30 :
Distribution of Circles Reserves Compared to USDC Capitalization
In addition, Circle points out that it is a profitable company, and that it has 800 million dollars of own cash. These assets could then come to the rescue of the USDC in an extreme case where part of its collateralization were to be lost for one reason or another.
In addition, if Circle were to go bankrupt, the fact that there is a clear dissociation between the company’s equity and the collateralization of its stablecoins allows the latter to be able to be exchanged at a ratio of one for one.
👉 On the same subject — Circle relies on France to develop its activity within the European Union
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Source: Circle
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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