- The deadline for the last of them expired on May 31
- USDC reserves now consist of cash and repurchase agreements
- The company is still wary of a possible default in the US and potential adverse effects
Yesterday, May 31, the last US Treasury bond in the USDC Reserve Fund expired. Now the stablecoin is backed for the most part by buyback agreements and cash.
Recall that Circle changed the structure of reserves in early May. Like most other US financial counterparties, the company feared a US technical default.
Prior to this, shortly after the banking crisis, the firm moved USDC reserves to BNY Mellon and a fund managed by Black Rock. As of May 30, the latter consisted of 100% overnight agreements worth $24.7 billion:
This step can be regarded as part of the firm’s strategy to protect reserves from a possible default. Although the parties in Congress did reach an agreement on a “debt” deal, such a delay will definitely have consequences.
The company has not yet commented on the situation. Prior to that, early last month, Circle CEO Jeremy Aller said the firm intends to get rid of Treasury bonds entirely. And as you can see, Circle performed this plan.
Further changes in the structure of USDC reserves are not yet known. But given how the banking crisis affected Circle, when the stablecoin even temporarily lost its peg to the dollar, there will be no volatile assets in it.