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Circle wants to hold its USDC reserves at the Fed as the stablecoin sees multiple new integrations
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(Kitco News) - In the wake of the collapse of Silicon Valley Bank (SVB), which briefly led to the de-pegging of USD Coin (USDC), the second-leading stablecoin in the crypto market, Circle, the company responsible for issuing USDC, has called for its cash reserves to be held with the Federal Reserve.
As previously reported by Kitco Crypto, Circle held roughly $3.3 billion worth of cash reserves that backed USDC at SVB, and temporarily lost access to the funds when the bank collapsed. Until the U.S. government ultimately stepped in to backstop all deposits at the bank, the crypto ecosystem had to deal with several days of uncertainty, which saw USDC fall to a low of $0.82 on some exchanges.
The stablecoin has maintained its U.S. dollar peg since the government announcement, and Circle is now looking to have its cash reserves held directly by the Fed so as to avoid another SVB-type situation.
“A U.S. dollar backed stablecoin requires access to the U.S. banking system to allow money to seamlessly flow in and out of crypto, enabling the safe, secure bridges between blockchain-based finance and fiat banking that are essential to the long-term growth of digital assets,” wrote Jeremy Fox-Green, Chief Financial Officer at Circle. “We have always aspired to hold the cash portion of the USDC reserve directly with the Federal Reserve, fulfilling our vision of USDC as true tokenized cash.”
Fox-Green acknowledged that such a move would require stablecoin legislation, saying, “we have been at the forefront of calls for federal regulation of the digital asset industry, and we are optimistic that Congress will act.”
Circle currently holds ~80% of its USDC reserve in short-dated U.S. Treasuries, with the other ~20% held in cash deposits at U.S. banks in order to satisfy the immediate liquidity needs of its customers.
While the firm awaits word on the possibility of storing reserves directly with the Fed, Circle has transferred the majority of its cash reserves to one of the 30 globally systemically important banks (GSIB). “GSIBs are widely recognized as the safest banks, with the highest capital, liquidity and supervisory requirements in the world,” Fox-Green wrote. “We also hold modest funds at our transaction banking partners in support of USDC liquidity operations.”
Fox-Green also addressed concerns that USDC holders could lose all their funds in the event that Circle declared bankruptcy. “The USDC reserve is held in segregated accounts for the benefit of USDC holders. By law and regulation, Circle cannot use the USDC reserve for corporate purposes. In the unlikely case of a Circle bankruptcy, the USDC reserve would remain segregated for USDC holders and would not be part of the bankruptcy estate.”
The CFO also said that Circle would utilize all of its corporate resources, which includes $800 million in corporate cash, and external capital to fulfill its obligations to USDC holders in the “unlikely case of any reserve deficit.”
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Circle looks to make France its European home base after USDC de-peg |
USDC added to Cosmos and Stellar
As a sign that Circle has no intentions of slowing down its plans with USDC, the stablecoin issuer has signed a new partnership with the Noble network which will see USDC integrated within the Cosmos ecosystem.
“We are excited to announce that Nobe will be an issuance platform for native USDC in the Cosmos and boundless Inter-Blockchcain COmmunicaion (IBC) ecosystem,” the announcement from Noble read. “For the first time in Cosmos history, 50+ IBC-enabled blockchains will soon be able to access USDC that has been natively issued on Noble.”
The official launch date of USDC on Noble has not yet been determined.
Circle also recently partnered with the Stellar Development Foundation and Coinme, a leading U.S.-based cryptocurrency cash exchange, to release USDC on Stellar utilizing the Coinme wallet and Coinme’s global cash onramp and offramp ecosystem.
According to the press release, “Coinme's integration of USDC on Stellar promotes financial inclusion by enabling physical cash to become borderless digital cash accessible across thousands of locations nationwide, making it simple and affordable to cash in, cash out, send, and receive USDC on Stellar.”
“By enabling USDC on Stellar in the Coinme wallet, anyone with cash can now utilize the Stellar blockchain to access a fully-backed dollar digital currency,” said Neil Bergquist, CEO and co-founder of Coinme. “People can now swap their cash for USDC on Stellar and send it in seconds for the cost of a penny.”
Coinme currently has thousands of physical retail locations where users can receive support if needed, while sending and receiving USDC via the Coinme Wallet is virtually free for peer-to-peer transactions, allowing for low-cost, near-instant payments to family and friends. The new service is now live in the web browser-based Coinme wallet, and will soon be available on the iOS and Android Coinme mobile apps.
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