• Circle, a stablecoin issuer, has modified its treasury reserves to guard against potential U.S. debt defaults.
• Treasury Secretary Janet Yellen has warned that the government must make „decisions“ if Congress does not raise the federal debt limit.
• Circle and Tether have both been reducing their reliance on bank deposits for liquidity and adjusting their reserve maturities accordingly.

Circle Adjusts Treasury Reserves Amid US Debt Crisis

Stablecoin issuer Circle has reportedly adjusted its treasury reserves in order to mitigate the risk of US debt defaults amid an ongoing banking crisis in the United States. On May 10th, Circle CEO Jeremy Allaire stated that the company has changed the mix of reserves backing its USD Coin (USDC) by transitioning to short-dated US Treasurys in order to avoid any potential involvement in a US debt default.

Treasury Secretary Warns of Default Without Raised Debt Limit

The US’s $24 trillion Treasury market and global financial system could experience significant disruption if the country were to default on its debts. In light of this, Treasury Secretary Janet Yellen recently warned that there would be necessary „decisions“ made should Congress fail to raise the federal debt limit which currently stands at $31.4 trillion. President Joe Biden and Republicans are currently disagreeing over raising said borrowing limit.

Circle & Tether Reducing Bank Deposit Reliance

Tether, another stablecoin issuer, claims that most of its reserves are invested in Treasury bills with an average maturity of less than 90 days and is working to reduce reliance on pure bank deposits as a source of liquidity according to their May 10th quarterly assurance report. Meanwhile, Circle’s Blackrock-managed Reserve Fund reveals holdings maturing no later than May 31st while also taking steps to diminish their reliance on such deposits for liquidity purposes like Tether.

USDC Supply & Market Share Decreases

Over the past year, supply of USD Coins (USDC) has been decreasing significantly – dropping by 46% from its all-time high circulation rate of $56 billion back in June 2022 – resulting in a decrease in market share down 23% with current circulation being only $30 billion compared rival Tether’s 62%. This comes after March 2023 saw USD Coins losing it’s peg leading to major withdrawals from them resulting in a 25% drop in market cap value since then .

Cross Chain Transfer Protocol Launched

In efforts towards consolidating their position as second largest stablecoin with a current market cap value of $30 billion , Circle recently launched a cross chain transfer protocol for their USDC stablecoins through Ethereum and other EVM compatible chains .

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice