Last week, another stablecoin issuer Paxos released a comprehensive analysis of all assets kept in reserve. Circle’s newest report follows Paxos’s lead by providing a comprehensive breakdown of all assets held in reserve.
Circle, the payments startup behind the USDC stablecoin, has disclosed a comprehensive analysis of the reserves underpinning its expanding dollar-backed currency.
Although unaudited, the quantity of data offered by Circle in its Thursday report is a first for the firm and a significant show of openness considering the scrutiny stablecoins receive from authorities across the globe, which has lately escalated after the collapse of Terra.
The corporation no longer owns the commercial paper, a sort of short-term, unsecured loan instrument, according to Circle’s report. In July of the previous year, 9 percent of Circle’s reserves were kept in commercial paper, but the company afterwards pledged to convert its entire portfolio to cash and U.S. treasuries.
According to a report released on Thursday, Circle had $42.1 billion in U.S. federal bonds as of 30 June. All of these bonds expire on or before September 29. Reportedly, the remaining $13.6 billion of the company’s reserves are kept in cash in authorised financial institutions such as Signature Bank, Silicon Valley Bank, Silvergate Bank, and others. This takes Circle’s total reserves to $55.7 billion, well beyond the 55 billion USDC coins in circulation.
USDC is the fourth biggest cryptocurrency by market capitalization and the second largest stablecoin in the cryptocurrency industry. Stablecoins are tokens whose values are tied to reasonably stable assets or currencies, such as the U.S. dollar.
Stablecoins often achieve stability by enabling immediate and simple redemption with their underlying asset. This induces arbitrage within the market, allowing the stablecoin to dependably revert to its price peg in the event of volatility.
This dependability, however, has been questioned for years by both outspoken sceptics inside the crypto sector and vigilant lawmakers and authorities. And these voices have only become louder after the collapse of Terra’s UST in May, the third-largest stablecoin on the market at the time, which was an algorithmic stablecoin maintained constant by code and not by reserves.