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.
👉 Going Deeper — Learn more about how the USDC stablecoin works
Trade stocks or cryptos
The broker who remunerates the uninvested funds
🎧 Listen to this article and all other crypto news on Spotify
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
🎁 Cryptoast Research Launch Offer
1st Newsletter Free with the code TOASTNL
Receive a summary of crypto news every Monday by email 👌
What you need to know about affiliate links. This page presents assets, products or services relating to investments. Some links in this article are affiliated. This means that if you buy a product or register on a site from this article, our partner pays us a commission. This allows us to continue to offer you original and useful content. There is no impact on you and you can even get a bonus by using our links.
Investments in cryptocurrencies are risky. Cryptoast is not responsible for the quality of the products or services presented on this page and could not be held responsible, directly or indirectly, for any damage or loss caused following the use of a good or service highlighted in this article. Investments related to crypto-assets are risky by nature, readers should do their own research before taking any action and only invest within the limits of their financial capabilities. This article does not constitute investment advice.
AMF recommendations. There is no guaranteed high return, a product with high return potential involves high risk. This risk-taking must be in line with your project, your investment horizon and your ability to lose part of this savings. Do not invest if you are not ready to lose all or part of your capital.
To go further, read our Financial Situation, Media Transparency and Legal Notices pages.