According to Circle, the assets will be kept at the Bank of New York Mellon, where the fund will be governed under the Investment Company Act of 1940, which calls for an independent board and daily portfolio reporting.
Circle has announced that it has begun investing pieces of its assets in Circle Reserve Fund, which was created earlier through a partnership with BlackRock, the world’s largest asset manager, and registered with the US Securities and Exchange Commission (SEC).
The company will now be moving the reserves for its USDC stablecoin into a dedicated fund set up by the asset manager.
The Circle Reserve Fund, a government money market fund managed by BlackRock Advisors, has been in development for months after BlackRock initially sought to register it in May. Circle will be its only eligible investor, as the stablecoin issuer has already started putting its reserves there, expecting to be “completely transitioned” by the end of March.
Jeremy Fox-Green, Circle’s Chief Financial Officer, stated in an interview that the move is a wrapper for the USDC reserve that brings benefits from that wrapper to the USDC and the ecosystem.
Green added that all of the firm’s short-term Treasury assets will be phased into the fund, though the cash reserve, which is almost 20% of the total, will still be held in partner banks because it allows customers to more easily redeem USDC around the clock.
However, he noted that it was only a short-term solution because BlackRock’s ultimate objective was to promptly apply to get the fund in the Federal Reserve’s reverse-repo program.
Fox-Geen stated that he intends to someday see Circle’s cash reserve stored at the Fed because such funds are typically given such access. He also added that these actions would “improve the risk profile, oversight, and disclosures concerning the USDC reserve.”
The latest development from Circle is part of the company’s effort to reduce risks and ensure that its coin holders may redeem their currencies.
According to weekly company filings, the $43.9 billion in USDC that is now in circulation is backed by $44.1 billion in cash and short-term US government bonds. Additionally, U.S. Treasury bonds will be included in the new fund’s portfolio.
According to Circle, the assets will be kept at the Bank of New York Mellon, where the fund will be governed under the Investment Company Act of 1940, which calls for an independent board and daily portfolio reporting.
Circle announced in September that its stablecoin would soon be available on five other networks, including Polkadot, Optimism, Near, Arbitrum, and Cosmos. The company added that the support for most of these blockchains will be rolled out by the end of 2023, while USDC on Cosmos will launch at the beginning of 2023.
The company also received in-principle approval for a major payments institution license in Singapore at the beginning of November, enabling it to issue cryptocurrency and facilitate local and international payments.
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