Circle’s Transparency Report Offers Full Glimpse Into Its USDC Reserve
- Circle plans to adopt a more transparent approach to build client trust.
With the recent collapse of most stablecoin platforms, Circle, a stablecoin issuer, has released a transparency report, detailing its USDC reserve. Terra’s demise raised doubts about stablecoins and caused many traders and investors to lose confidence in the asset.
For the first time ever, Circle offered a breakdown of its USDC holdings, a step targeted at regaining trust in stablecoins. According to details published by Circle, as of late last month, the $55.7 billion in the firm’s reserves consisted of $42.12 billion in short-term US Treasuries and $13.58 billion in cash deposited in financial organizations. Furthermore, Circle’s Treasury assets had a weighted average maturity of 43.9 days.
Sharing details of its holdings, Jeremy Fox-Green, Circle’s chief financial officer, wrote in a post,
The USDC reserve is held solely in cash and 3-month U.S. Treasuries, held in segregated accounts for the benefit of USDC holders, and is entirely separate from Circle’s operations. The USDC reserve is subject to all the same protections under U.S. state and federal law as afforded to other large scale payments innovators entrusted by millions of customers with tens of billions of dollars of customer assets.
Circle noted that the release was its first step toward giving frequent updates about its reserves and holdings. The firm intends to continue to roll out a monthly update of its stablecoin reserve assets and, subject to custodian approval, it plans to eventually give daily information on its holdings.
How Stable is Circle?
Despite the convincing words from Jeremy that the reserves backing the USDC were ring-fenced, worries about the condition of the collateral supporting the stablecoin continue to persist. During an interview with Forkast, Jeremy claimed that Circle had no claim to the USDC reserves that are kept in segregated accounts with financial institutions since they are governed by state money transmission rules in the U.S.
Speaking in the interview, Jeremy said,
The institutions that hold the USDC reserve aren’t lending it out in any way to grow USDC. They’re just holding fiat currency within the banking system and holding U.S. Treasuries in custody on behalf of USDC holders, so there’s no lending out of USDC to grow USDC. All USDC growth is driven by customer activity.”
There are huge concerns on social media that Circle’s reserves are unaudited. Twitter user, Frances Schadenfreude Cassandra, claims the USDC is not as safe as people think. Many others argue that Jeremy’s claim that Circle has no hold on its reserve is false. Some question how the stablecoin issuer plans to earn $438 million for the entire year of 2022 from interest generated by USDC reserves,
Despite the growing doubts, many others believe that Circle will not use USDC holders’ funds to run its operations or sort its debt.