Circle Completely Removes U.S. Treasury Bonds from Reserves
Circle has entirely removed U.S. Treasury bonds from the reserve assets backing its stablecoin USDC, opting instead for cash and repo agreements to mitigate risk in light of the U.S. debt crisis.
Circle Completely Removes U.S. Treasury Bonds from Reserves
Circle has fully divested from U.S. Treasury bonds as part of its strategy to shield itself from potential risks associated with the U.S. national debt crisis.
The reserve fund for Circle is now managed by global investment giant BlackRock. As of May 30, 2023, Circle holds $24 billion in reverse repurchase agreements (repo), which are agreements allowing Circle to repurchase the bonds at a higher price at a future date.
This marks a significant shift from late April, when Circle held nearly $30 billion in U.S. Treasury bonds, as previously reported by Coin68. On May 11, CEO Jeremy Allaire confirmed that Circle would cease holding short-term bonds after their maturity at the end of May. A week later, the stablecoin issuer began converting its short-term bonds into cash.
On May 17, Circle used $8.7 billion in U.S. government bonds as collateral for loans from BNP Paribas, Goldman Sachs, Barclays, and the Royal Bank of Canada, structured as repo agreements as mentioned earlier.
Circle’s Repo Agreements. Source: BlackRock
Meanwhile, competitor Tether announced plans to shift its government bonds into Bitcoin, investing up to 15% of its monthly profits. The company also revealed plans to stockpile Bitcoin through the establishment of a mining farm in Uruguay.
On May 28, the White House and U.S. Congress reached a deal to raise the debt ceiling, averting a default and causing the crypto market to recover. President Joe Biden had previously sought to increase tax pressure on the crypto-rich to balance the national budget. However, the deal must be approved by both chambers of Congress by June 5, 2023, or the U.S. government could face a financial catastrophe, as warned by Treasury Secretary Janet Yellen.
