Circle, the payments company behind USDC stable currencyhas issued a full asset breakdown of reserves backing its rising dollar-pegged token.
The level of detail provided by Circle in its Thursday report, while unaudited, is a first for the company and a notable display of transparency, as the stablecoins currently under scrutiny from regulators around the world, which have been in the news since Terra’s collapse. accelerated after.
Circle’s report shows that the company no longer holds commercial paper — a type of short-term, unsecured debt instrument — as part of its service. In July last year, Circle kept 9% of its reserves in commercial paper, but later promised to transfer the entirety to cash and US treasuries.
Thursday’s report shows Circle held $42.1 billion in US Treasury bonds as of June 30. All such bonds expire on or before September 29. The company’s remaining reserves, $13.6 billion, are reportedly stored in cash and held with regulated financial institutions such as Signature Bank, Silicon Valley Bank, Silvergate Bank and others.
This brings Circle’s total reserves to $55.7 billion – slightly more than the 55 billion USDC tokens currently in circulation.
USDC It is currently the fourth largest cryptocurrency by market cap, and the second largest stablecoin in the crypto economy. A stablecoin is a tokenized value pegged to a relatively price-stable asset or currency, such as the US dollar.
Typically, stablecoins achieve stability by providing instant and easy redeemability with their underlying assets. This creates an arbitrage incentive within the market that allows the stablecoin to return reliably to its price peg if volatility is ever encountered.
But that credibility has been questioned for years by vocal critics within the crypto industry and by politicians and regulators who watch it carefully. And these voices have only intensified after the May collapse of the third-largest stablecoin on the market, Terra’s UST—an algorithmic stablecoin that was not held by reserves but by code.
Terra, for the once popular blockchain DeFi Trading, the now-defunct lending protocol Anchor attracted billions of dollars in investment by promising returns of up to 20% on UST deposits. UST failed to maintain its price after the move on Anchor and both the stablecoin and its sister token LUNA fell to zero.
Centralized stablecoin issuers such as Circle, Tether and Paxos have faced increased pressure to assure their customers that their tokens will not meet the same fate, especially from account freezes and bankruptcy of once-trusted crypto. Lenders shake up the sector.
Last week, Paxos—the USDP stablecoin issuer and the custody platform behind BUSD, the third-largest stablecoin—provided a similar report on its reserve holdings. According to its report, it was backed entirely by Treasury bills, Treasury bonds and cash as of June 30, with $17.5 billion in assets.
Only Tether, the issuer behind the long-time king of stablecoin USDT, has yet to provide a similarly detailed report. The firm’s most recent verification numbers from late March showed $82 billion in reserve assets, although that figure is likely to be lower as the token has since passed in billions of dollars in redemptions.
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