Circle Begins Transition of USDC Reserves to New BlackRock Fund

Circle's reserve assets backing its USDC stablecoin will be transitioned to a new money market fund managed by BlackRock, with the change set to take effect early next year.

Circle Internet Financial has initiated the transfer of reserves for its USDC stablecoin into a newly established money market fund managed by BlackRock and registered with the U.S. Securities and Exchange Commission (SEC), the company disclosed on November 3rd.

The Circle Reserve Fund, a government money market fund managed by BlackRock Advisors, has been operational for several months. The transfer process is expected to be completed by the end of March next year.

Jeremy Fox-Geen, CFO of Circle, stated in an interview with CoinDesk that all short-term Treasury reserves will be moved into the fund, while cash reserves (approximately 20%) will remain with partner banks to facilitate easier redemption of USDC for customers.

However, Fox-Geen noted that this is a temporary measure, with the ultimate goal being to transition the fund into the Federal Reserve’s reserve-repo program. He hopes that Circle’s cash reserves will eventually be held at the Fed.

These efforts aim to “enhance the risk profile and public perception surrounding USDC reserves,” Fox-Geen explained. As of October 27th, Circle has a circulating supply of $43.9 billion backed by $44.1 billion in cash and various short-term government securities.

Weekly USDC Reserve Analysis. Source: Circle’s Website

Approximately $8.4 billion of this cash is held in bank accounts such as New York Mellon, according to Circle. These accounts are required to comply with the Investment Company Act of 1940, which mandates an independent board of directors and daily investment reporting.

Circle previously began establishing financial relations with BlackRock, the world's largest asset manager, from its $400 million funding round in April.

While stablecoin issuers have been eagerly awaiting formal regulatory frameworks in the U.S., it appears that the legislation may not be finalized this year. Nonetheless, policymakers broadly agree that stablecoins operating in the U.S. should be fully backed by reserves such as Treasury securities.