Circle, issuer of the world’s second-largest stablecoin USDC, has announced plans to be 100% backed by cash and short-term U.S. Treasuries by September. The company’s most recent attestation showed USDC’s US$22.2 billion supply was backed by only 61% “cash and cash equivalents.”
- Circle had indicated earlier in the month that it wishes to become a full-reserve national digital currency bank in the U.S., making this announcement an important step in that process. Company CEO and co-founder Jeremy Allaire said of the plan: “We believe that full-reserve banking, built on digital currency technology, can lead to not just a radically more efficient, but also a safer, more resilient financial system.”
- The project appears to have the backing of the Federal Reserve Governor Christopher Waller, who supports the creation of a private sector digital currency as opposed to a central bank digital currency, which are growing in popularity elsewhere in the world. “The private sector is already developing cheaper payment alternatives to compete with the banking system … Hence it seems unnecessary for the Federal Reserve to create a CBDC to drive down payment demands we see by banks,” Waller said.
- The Federal Reserve notwithstanding, Stablecoins have come under increasing regulatory scrutiny recently, as the chair of the U.S. Securities and Exchange Commission said they should be subject to the securities laws that underpin them. This mirrors similar remarks from Treasury Secretary Janet Yellen, who earlier had called for greater regulation on the industry, saying stablecoins posed a risk to the financial system and national security.
- Earlier Circle announced plans to go public through a merger with special purpose acquisition company Concord Acquisition Corp, which is expected to be complete in the fourth quarter of this year. The deal valued Circle at US$4.5 billion.
- In line with its reporting requirements with the New York State Attorney General’s office following a US$18.5 million settlement earlier in the year, Tether, the issuer of rival stablecoin USDT, released its own report to show it was 100% backed by its reserves. The investigation looked into whether Tether and sister firm Bitfinex sought to cover up losses of US$850 million in funds.