Circle, the issuer of the popular stablecoin USDC, has provided details on the structure and management of the USDC reserve. According to Circle’s official blog post, the reserve is fully transparent and has third-party assurances that it has sufficient assets to cover its liabilities. The USDC reserve consists of about 80% short-term U.S. Treasuries and about 20% cash deposited in the U.S. banking system.
The short-term U.S. Treasuries in the reserve are considered the most liquid assets in the world and are held in an SEC-regulated, wholly-owned, government money fund structure. They are not subject to lock-ups or redemption gates, and there is daily independent, third-party reporting on this portfolio, down to each individual security.
USDC is always redeemable 1:1 for U.S. dollars. This is made possible by our financial infrastructure and regulation-first approach. Read our latest blog for insights into the USDC reserve. https://t.co/QEc2luEPk7
— Circle (@circle) March 28, 2023
The cash portion of the USDC reserve is held in segregated accounts for the benefit of USDC holders and is used to satisfy the immediate liquidity needs of customers. Circle has taken steps to reduce risk from the banking system by holding substantially all of the cash portion of the reserve at one of the world’s 30 global systemically important banks, also known as a GSIB.
Circle has always aspired to hold the cash portion of the USDC reserve directly with the Federal Reserve to fulfill its vision of USDC as true tokenized cash. However, stablecoin legislation is needed for this to happen. Circle has been at the forefront of calls for federal regulation of the digital asset industry since its founding in 2013 and is optimistic that Congress will act.
In the unlikely event of a Circle bankruptcy, the USDC reserve would remain segregated for USDC holders and would not be part of the bankruptcy estate. Circle stands behind USDC and its obligations to USDC holders, with all its corporate resources, including current corporate cash in excess of $800 million and external capital if necessary.
USDC is a true bearer asset that is always redeemable 1:1 for the U.S. dollar. It is capable of self-custody and transferable to anyone, anywhere, at the high speed and low cost of the internet. USDC has the potential to transform financial services by lowering costs and increasing utility for billions of users.
The transparency and management of the USDC reserve provide confidence to USDC holders and demonstrate the industry’s commitment to safe and secure stablecoins. As the digital asset industry continues to grow, regulatory clarity and stablecoin legislation will be essential to ensure the safe and seamless flow of money between blockchain-based finance and fiat banking.
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