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The stablecoin issuer Circle has reportedly adjusted its treasury holdings to mitigate the risks of a US default.
According to a May 10 Politico newsletter, Circle CEO Jeremy Aller said the firm has adjusted the mix of reserves backing its U.S. dollar (USDC) coin by switching to short-term U.S. Treasuries to avoid a potential U.S. debt default.
He said the firm is no longer holding Treasuries maturing after the start of June because it wants to avoid debt risk.
“We don’t want to risk a potential disruption to the US government’s ability to pay its debts.”
The Blackrock-managed Circle Reserve Fund shows that current assets are due to be redeemed no later than May 31st.
Earlier this week, Treasury Secretary Janet Yellen said the government would be forced to make “decisions” if Congress did not raise the federal debt limit.
US President Joe Biden and Republicans disagree on raising the $31.4 trillion borrowing limit. The $24 trillion Treasury bond market and the global financial system would be shocked if a country defaulted on its debt.
Rival stablecoin issuer Tether claims that most of its reserves are invested in Treasury bills with an average maturity of less than 90 days.
The firm said it is “working to take steps to reduce its reliance on purely bank deposits as a source of liquidity,” according to its May 10 quarterly guarantees report.
Related: Banking crisis worries reach levels not seen since 2008 – poll
The USDC supply has declined over the past year, falling 46% from its all-time high of $56 billion in June 2022. This caused its market share to drop to 23% on a $30 billion turnover. The beneficiary was competitor Tether as its market dominance increased to 62% with a turnover of US$82 billion.
In April, Aller blamed America’s war on cryptocurrencies and a looming banking crisis for its declining market capitalization.
Cointelegraph has reached out to Circle for more details, but has yet to receive a response as of press time.