In light of the recent debate over the debt limit in the United States, Circle has taken bold action.
Circle Internet Financial, a major player in the cryptocurrency industry and the creator of the world’s second-largest stablecoin, has taken a bold step by selling all of the U.S. Treasury bonds in the reserve pool that backs its USDC stablecoin.
This precautionary measure was taken to protect USDC from the fallout of the current worries around the United States debt limit.
According to Circle’s most recent monthly attestation, published by independent auditors at Deloitte, the last $4 billion Treasury bond matures on May 31.
As a result, the reserve fund no longer contains any long-term Treasuries. The whole $24.7 billion in the Circle Reserve Fund, administered by respected Wall Street firm Blackrock, has been invested in overnight U.S. Treasury Repurchase Agreements as of May 30, 2023.
The issuer of USDC no longer owns more than $30 billion in U.S. Treasury Bonds, a dramatic change from the fund’s makeup in April 2023. The impending U.S. debt limit issue, which threatened to have severe repercussions for all government assets, led to the changes to the Reserve fund.
Circle’s decision to stop holding U.S. Treasury bonds is consistent with the goals set forth by CEO Jeremy Allaire. Earlier this month, Allaire told Politico that his cryptocurrency firm was moving away from this asset class in favour of short-dated U.S. Treasuries in an effort to protect the USDC stablecoin from the risks associated with a potential U.S. debt default.
Jeremy Allaire says the goal is to “distance ourselves from any potential fallout caused by a breach in the U.S. government’s capacity to execute its financial commitments.”
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