Circle Adjusts Treasury Reserves to Mitigate Risk of US Debt Default

• Circle, the stablecoin issuer, has adjusted its treasury reserves to safeguard against a potential US debt default.
• The company is now investing in short-term US Treasurys with maturities no longer than early June.
• Tether also claims that most of its reserves are invested in Treasury bills with an average maturity of less than 90 days.

Circle Adjusts Reserves to Mitigate Risk of US Debt Default

Circle, a stablecoin issuer, has reportedly adjusted its treasury reserves to reduce the risk of a default on US debt. On May 10th, CEO Jeremy Allaire stated that the company has shifted their mix of reserves backing USD Coin (USDC) by transitioning to short-dated US Treasurys to avoid possible involvement in a US debt default. In order to minimize debt exposure, Circle will no longer hold Treasuries with maturities beyond early June.

Treasury Secretary’s Comments on Raising Federal Debt Limit

Treasury Secretary Janet Yellen recently indicated that if Congress fails to raise the federal debt limit, the government must make “decisions”. If this occurred, it would lead to disruption in both the $24 trillion Treasury market and the global financial system due to potential defaults on debts. President Joe Biden and Republicans are currently at odds over raising the $31.4 trillion borrowing limit.

Circle Reserve Fund Holdings

The Blackrock-managed Circle Reserve Fund holds assets maturing no later than May 31st as revealed by Circle CEO Jeremy Allaire. He noted that they do not want any exposure through a breach of ability for U.S government to pay back their debts.” Similarly, Tether states that most of its reserves are invested in Treasury Bills with an average maturity rate under 90 days as indicated by their quarterly assurance report from May 10th which was released today.. This report also states that Tether is working towards reducing reliance on bank deposits as source of liquidity”

USD Coin Supply Decrease & Market Share Drop

Over the past year there has been a 46% decrease in supply for USD Coin (USDC), dropping from it’s all time high of $56 billion in June 2022 down to current circulation rate of $30 billion leading it’s market share drop from 27% down 23%. Contrastingly rival Tether (USDT)’s market dominance has increased 62%, with current circulation rate at 82 billion USDT .

Cross Chain Transfer Protocol for USDC Released

Recently Circle released cross chain transfer protocol for USDC via Ethereum and other EVM compatible chains as well as launching other services such as . This year however faced turbulent times where stability was questioned when peg was lost during March 2023 leading withdrawal from USD coin and subsequent decrease in market cap by 25%.