Stablecoin issuer Circle has reportedly adjusted its reserve treasury in an effort to mitigate risks of United States debt defaults.
According to Politico’s May 10 news release, Circle CEO Jeremy Allaire stated that the firm has adjusted its mix of reserves backing USD Coins to favor short-term US treasury bonds to avoid a potential debt default.
Allaire: We Want to Avoid Debt Risk
Making a statement on the subject, Jeremy Allaire said that the company no longer holds treasury bonds due after the beginning of June because it wants to avoid debt risk.
Allaire continued, “We don’t want to take risks through a potential breach of the US government’s ability to pay its debts.” The Circle Reserve Fund, managed by BlackRock, stated that the current assets are due by May 31 at the latest.
Earlier this week, Treasury Secretary Janet Yellen said the government would have to make decisions if Congress didn’t raise the federal debt limit.
US President Joe Biden and Republicans are at odds over raising the $31.4 trillion borrowing limit. If the country cannot pay its debts, the $ 24 trillion treasury market and the global financial system will be shaken.
Circle said it is seeking to take steps to reduce its reliance on pure bank deposits as a source of liquidity, according to its May 10 quarterly assurance report.
The supply of USDC has shrunk over the past year, falling 46 percent since its all-time high of $56 billion in June 2022. This caused its market share to decrease to 23 percent with a circulation of 30 billion dollars. The most profitable one from this situation was the rival Tether, whose market dominance increased to 62 percent with a circulation of 82 billion USDT. In April, Allaire blamed America’s war on crypto and the banking crisis for the declining market value of USDC.
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