Circle Reveals USDC is Mostly Backed By Cash and Cash Equivalents

Divya  |  Jul 21, 2021, 8:30 am
Circle Reveals USDC is Mostly Backed By Cash and Cash Equivalents

Digital currency company Circle revealed on Tuesday that 61% of the USDC stablecoin is backed by cash and cash equivalents. The revelation was made in a breakdown published for the first time in the company’s latest attestation report. The stablecoin has grown over 2,600% since the beginning of 2021, with nearly $22.2 billion worth of tokens issued to date

Majority of USDC Backed by Cash and Cash Equivalents

According to the report prepared by auditors at Grant Thornton, the stablecoin’s reserves include cash from “deposits at banks and Government Obligation Money Market Funds” and cash equivalents, which are defined as "securities with an original maturity less than or equal to 90 days in accordance with generally accepted accounting principles (US GAAP).”

In addition to cash, Yankee Certificates of Deposit also account for a significant share of USDC allocation. The report shows that 13% of the currency’s reserves are in the form of CDs issued by non-American banks in the US. A further 12% is accounted for by US Treasuries, whereas commercial paper and corporate bonds account for 9% and 5% of the remaining tokens respectively.

The attestation report is the first glimpse at what backs the second-largest stablecoin in the three years since its creation. 

"Since nearly three years ago when the first USDC entered circulation, Circle, together with Centre Consortium, have prioritized trust, transparency, and accountability," Circle’s CEO and Founder Jeremy Allaire noted in a statement. He added that “These priorities have helped USDC grow widely within the global blockchain ecosystem.”

Circle is in talks with a special purpose acquisition company(SPAC) at the moment for a deal that will allow it to go public sometime later this year. Reports suggest that the company could be valued up to $4.5 billion in the deal.

Circle Follows Tether in Disclosing Its Stablecoin Backing

Presently, public disclosure of reserves is not a mandatory requirement enforced by regulations upon issuers of private digital currencies. But by publishing a breakdown of its asset reserves, Circle seems to be following the lead of Tether, which released a similar report earlier. 

However, both these currencies have only partially answered questions relating to their backing. For instance, Circle’s investment in backing USDC is still unclear. Nevertheless, the company aims to foster trust in dollar-denominated assets to address regulator concerns on the potentially disruptive effect of stablecoins.