Circle Dumps Long-Term Treasuries Over U.S. Debt Concerns

Circle has announced that it has divested from holding long-term U.S. Treasuries. The move comes in response to concerns over the U.S. government’s ability to pay its debts, as noted by Circle CEO Jeremy Allaire in a statement to Politico on May 10.

Specifically, Circle has liquidated its Treasuries that mature after June 2023. Allaire explained that the company did not want to risk being exposed to a potential breach of the U.S. government’s ability to meet its financial obligations.

Circle CEO Jeremy Allaire

This announcement follows statements made by U.S. Treasury Secretary Janet Yellen that the U.S. government could face difficulty paying its bills as early as June 1 and that a default on its debt could happen at a later date. These comments have raised concerns among the public and investors alike.

Circle backs its USDC stablecoin with a combination of assets, including cash, cash equivalents, and Treasuries. As of January, about 65% of its USDC reserves were made up of Treasury bills, which means that a default could have had a significant impact on its reserves.

This news coincides with Tether’s announcement that its USDT stablecoin is backed by $1.5 billion of Bitcoin, as well as previously disclosed assets. Tether and Circle’s USDC are the two largest stablecoins in circulation, with market caps of $82.6 billion and $30.1 billion, respectively.

The move by Circle to divest from long-term Treasuries demonstrates the company’s cautious approach to risk management. With the potential for a U.S. government default looming, it is understandable that Circle would want to limit its exposure to such an event.

The stablecoin market is becoming increasingly important in the world of cryptocurrency, and the decisions made by companies like Circle and Tether could have a significant impact on the market as a whole. As the situation with U.S. Treasuries continues to evolve, it will be interesting to see how other stablecoin issuers respond and adapt.

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