USD Coin is fully collateralized

The report on USD Coin (USDC) reserves for the end of 2022 has been published. 

The report was prepared by the specialized firm Grant Thornton and was published on the official website of Circle, which is the company that issues USDC. 

The report on USD Coin reserves

The report is dated 25 January 2023, and refers to reserve balances as of 31 December 2022. 

Grant Thornton states that it reviewed Circle Internet Financial’s statement regarding USDC reserves, which stated that as of 31 December 2022 there were 44.5 billion USDC outstanding, compared to reserves of nearly $44.7 billion. 

They also claim that they conducted their audits in accordance with the attestation standards established by the American Institute of Certified Public Accountants, so that they could obtain reasonable assurance regarding information about USD Coin reserves. 

As a result of these audits, they believe that they have obtained sufficient and appropriate evidence to provide a reasonable basis regarding the information released by Circle on reserves, such that they have declared that Circle’s report dated 31 December 2022 is correct in all material respects.

Therefore, according to Grant Thornton, Circle is not lying when it claims to have issued 44.5 billion USDC against reserves of more than $44.6 billion. 

The reserves of USD Coin

The document signed by Grant Thornton also reveals how that $44.6 billion in reserves is allocated. 

More than $34 billion is made up of US Treasury bonds, while another $10.5 billion is held in cash at financial institutions. 

USD Coin reserves consist of more than 77% of US government debt obligations, while the remaining 23% are simply dollars. 

This confirms USDC as one of the safest dollar-pegged stablecoins in existence. 

Grant Thornton

Grant Thornton LLP is the US subsidiary of Grant Thornton International, or the seventh largest accounting network in the world. The US subsidiary itself is the sixth largest accounting and consulting organization in the United States, with 59 offices and about 8,500 employees. 

It is a firm founded 99 years ago as Alexander Grant & Co., which later became Grant Thornton LLP in 1986 because of its affiliation with Britain’s Thornton Baker. 

It is headquartered in Chicago, and has three lines of services, including audits, tax and economic/financial consulting. 

Specifically with regard to audits, such as the one performed on behalf of Circle, it not only examines the accuracy of financial statements, but also uses professional tools and processes to conduct integrated audits required by the SEC and under the Sarbanes-Oxley Act.

Given its reputation, it can be expected that markets and investors will not question Circle’s claims about USDC’s reserves unless something else is discovered in the future. 

Concerning the reserves of other stablecoins, there are doubts or perplexities, either because of their quantity, or the managers or auditors, or the assets in which they are invested. The report signed by Grant Thornton for Circle, on the other hand, leaves little room for doubt. 

The capitalization of USDC Coin

Reports like these are released every month by Circle, so it is not surprising that the market has not reacted to this latest one. 

On the contrary, since the beginning of the month, USDC’s market capitalization has dropped, from the initial 44.5 billion to the current 43 billion. 

In fact, this decline began in mid-December, from 45.2 billion, but the highest peak in 2022, as well as ever, was touched in June when it reached over 56 billion. 

It is worth noting that before the last major bull run, that is, in December 2020, USDC capitalized less than $3 billion. 

Then the 2021 bull run caused USD Coin’s market capitalization to skyrocket from $3 billion to over $53 billion up to February 2022, followed by a brief decline until May. Then suddenly, due to the implosion of the Terra/Luna ecosystem with its UST stablecoin, it rebounded for a few months until peaking the following month. 

Since then it has declined, but always remaining at extremely higher levels than in late 2020. Current capitalization levels are in line with those of December 2021, when the last major bull run was over.