Circle discloses reserves for USDC backing3 min read
Circle, the company that maintains the USDC stablecoin, released its first monthly report on the assets backing the stablecoin. Report analyzes the assets held by the company until June 30, 2022.
According to the report, Circle holds $55.7 billion in its reserves, against USDT’s $55.3 billion market cap. That is, the company has enough reserves to guarantee the value of the stablecoin.
Circle’s reserves consist of cash and 3-month US Treasuries, which are more liquid in the market. In this way, the company claims to have the ability to return the assets of its customers in a short period of time. Of the total, $13.2 billion of reserves is in cash, while $42.5 billion is in government bonds.
This figure is on par with USDC market capitalization data shown by Coinmarketcap. Circle also provided a complete list of USDC reserve custodians.
When a currency is not properly backed, pressure from customers trying to withdraw their funds and switch to a more reliable asset can lead to a spiraling effect that ends up collapsing. This happened with the stablecoin UST, which lost its ballast and had its value destroyed.
Good relations with regulators
Jeremy Fox-Geen, Circle’s chief financial officer, also highlighted the company’s good relations with regulators. Since its launch in 2018, Circle has obtained monthly certifications from leading third-party accounting firms on the adequacy of reserves and their composition.
In addition, Circle has made sure to comply with all audits required by regulators, along with their recommendations. In this sense, the new audit reinforces the company’s commitment to transparency.
“Circle audits recorded in our public SEC filings are available here. Audits and attestations serve different purposes which are discussed in this blog, How to Build Trust,” the company said.
It is worth noting exactly these differences, as the most recent audit is part of a new policy at Circle. In fact, the company already publishes periodic balance sheets, but now, with the new report, the information will be made public more frequently.
At the same time, Circle seeks to expand its range of stablecoins to other global currencies, such as EUROC, a stablecoin backed by the euro.
Greater transparency in stablecoin projects
After the UST collapsed, the stablecoin market experienced a short period of investor distrust. Tether, the USDT issuer, has felt this the most, which has seen its reserves drop by nearly $20 billion in the past three months.
On the other hand, USDC’s reserves grew by $5 billion over the same period, but the company had to deal with rumors of possible bankruptcy. This shows that stablecoin projects are increasingly under pressure from investors, who demand more transparency.
USDT, for example, lost its parity against the US dollar for a few days, while USDC was unaffected. Due to this fact, Tether Limited started to work to reduce the amount of commercial paper in its reserves, an investment considered to be high risk.
Circle, according to its report, does not have commercial papers listed as backing for USDC, which in theory makes the stablecoin safer. And it is precisely this security that the market now demands from projects that move billions of dollars a day.