• Circle, a stablecoin issuer, has reportedly adjusted its treasury reserves to mitigate the risk of US debt defaults.
• Treasury Secretary Janet Yellen recently indicated that the government would have to make „decisions“ if Congress fails to raise the federal debt limit.
• Currently, USDC is the second-largest stablecoin with a market cap of $30 billion and Tether’s market dominance has increased to 62%, with a circulation of $82 billion USDT (USDT).
Circle Adjusts Reserves Amid Banking Crisis
Stablecoin issuer Circle has reportedly adjusted its treasury reserves to mitigate the risk of US debt defaults amid the ongoing banking crisis in the United States. CEO Jeremy Allaire stated on May 10 that Circle has altered its mix of reserves backing its USD Coin (USDC) by transitioning to short-dated US Treasurys in order to avoid potential involvement in a US debt default.
Treasury Department’s Stance on Debt Limit
Treasury Secretary Janet Yellen recently indicated that the government would have to make „decisions“ if Congress fails to raise the federal debt limit. The $24 trillion Treasury market and global financial system could experience significant disruption if country defaults on debts. Currently, President Joe Biden and Republicans are in disagreement over raising the borrowing limit set at $31.4 trillion.
Circle Reserve Fund Holdings
The Blackrock-managed Circle Reserve Fund reveals holdings maturing no later than May 31. This seeks to minimize debt exposure as Allaire explains “We don’t want to carry exposure through a potential breach of the ability of U.S. government to pay its debts.“ Tether, another stablecoin issuer, claims that most of its reserves are invested in Treasury bills with an average maturity of less than 90 days and is taking steps „to reduce reliance on pure bank deposits“.
USD Coin Supply
Over the past year, USDC supply has been declining, having dropped 46% from all time high at $56 billion USD in June 2022 leading decrease in market share down 23%. On other side rival Tether’s market dominance has increased up 62%, circulating 82 billion USDT (USDT). Notably, Circle recently launched cross-chain transfer protocol for USD Coin via Ethereum and other EVM compatible chains .
Circle’s USDC stablecoin remains second largest stablecoin with current market cap standing at $30 billion which faced turbulent times this year when it lost peg back March 2023 leading withdrawals from coin and cap drop over 25%. Disclaimer: This article is provided for informational purposes only, it is not offered or intended as legal advice or tax advice or financial advice etc…