Circle Internet Financial Ltd. adjusted the mix of reserves backing its USD Coin to favor short-dated US Treasuries so it can avoid getting caught up in a potential US debt default, Chief Executive Officer Jeremy Allaire said in a interview with Politico.
(Bloomberg) — Circle Internet Financial Ltd.
adjusted the mix of reserves backing its USD Coin to favor short-dated US Treasuries so it can avoid getting caught up in a potential US debt default, Chief Executive Officer Jeremy Allaire said in a interview with Politico.
Allaire said the company, issuer of the No.
2 stablecoin by circulation, no longer holds Treasuries maturing beyond early June because it doesn’t want to carry exposure “through a potential breach of the ability of the US government to pay its debts,” he said in the interview.
Disclosures from Circle Reserve Fund, managed by BlackRock Inc., show that current holdings mature no later than May 31.
A spokesperson from Circle didn’t immediately respond to requests for comment. USD Coin’s market value stood at about $30 billion as of Wednesday, according to CoinGecko.
President Joe Biden and congressional Republicans are locked in a staredown over raising the $31.4 trillion borrowing limit, with GOP leaders demanding promises of future spending cuts before they approve a higher ceiling.
Treasury Secretary Janet Yellen has warned that the Treasury risks running out of room to stay under the debt ceiling as soon as June 1 if Congress doesn’t raise the federal debt limit. While few investors doubt that America will make good on its debts., even a technical default would roil the $24 trillion Treasury market, the bedrock of the global financial system.
The vulnerability of Circle’s reserves to outside shocks came into sharp focus in March, when USD Coin temporarily lost its 1-for-1 peg to the dollar after it emerged that $3.3 billion of the reserves used to back the stablecoin were held at the collapsed Silicon Valley Bank.
The token has since stabilized.
Tether Holdings Ltd, the operator of the largest stablecoin, reported on Wednesday that it increased its holdings of US Treasury bills to $53 billion. Its Treasury bill holdings have a residual average maturity of less than 90 days.
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