Stablecoin issuer Circle has reportedly adjusted its reserve pool to reduce the risk of US debt default.
According to a Politico newsletter on May 10, Circle CEO Jeremy Allaire said the company has adjusted the mix of reserves backing its US dollar coin, Avoid getting caught in a potential US debt default by switching to short-term US Treasurys.
The company no longer holds Treasurys maturing after early June because it wants to avoid debt risk, he said. "We don't want to take the risk that the US government's ability to service its debt could be undermined." The Circle Reserve Fund, managed by Blackrock, shows that current holdings expire no later than May 31. Earlier this week, Treasury Secretary Janet Yellen said the government would be forced to make a "decision" if Congress didn't raise the federal debt ceiling.
US President Joe Biden and Republicans are at odds over raising the $31.4 trillion borrowing limit. If the country defaulted on its debt, the $24 trillion Treasury market and the global financial system would be thrown into chaos. Rival stablecoin issuer Te the claims the majority of its reserves are invested in Treasury bills with an average maturity of less than 90 days.
According to its quarterly assurance report on May 10, the company said it had been "working hard to take steps to reduce its reliance on pure bank deposits as a source of liquidity". USDC's supply has been shrinking over the past year, down 46% since its all-time high of $56 billion in June 2022. This caused its market share to drop to 23%, with $30 billion in circulation. The beneficial has been rival Tether, whose market dominance has risen to 62% with $82 billion in USDT in circulation.
In April, Allaire blamed the US war on cryptocurrencies and the banking crisis for USDC's shrinking market cap.
