More power to USDC: might get ancillary access to Fed's RRP.

USDC issuers have started investing in CRF.
Its increasing use might provide indirect access to Fed’s Reverse Repo Program (RRP).
This will make USDC a non-bank hybrid between CBDC and insured deposit.

Jeremy Fox-Green, Circle CFO, has recently announced that stablecoin issuers have started investing in CRF (Circle Reserve Fund). And the prominent stablecoin USDC might be getting a backdoor entry to Federal Reserve’s risk-free liability, and the partner BlackRock is applying for the Fed’s reverse repo program (RRP).

The Circle is qualified as an indirect investor in a government money market fund. The reserve comprises 20% cash held at the Bank of New York Mellon and short-term US Treasuries 90%.

“These reserve funds ought to increase investors’ confidence in the redeemability and stability of their USDC holdings, 1:1 against USD at any time.” – Fox-Green said.

Furthermore, Circle is set to convert all its existing Treasury holdings to CRF (Circle Reserve Fund) by March 2023 end.

Joseph Abate, Strategist at Barclays, wrote that BlackRock is planning to gain access to Federal Reserve’s overnight reserve repurchase facility (RRP) by using Circle’s Reserve Fund.

RRP (Reverse Repurchase) is a monetary instrument allowing Federal Reserve to sell a security to an eligible party by agreeing to repurchase the same security later. Through RRP, Circle will have indirect access to risk-free central bank liability.

“This makes USDC an intriguing non-bank hybrid between an insured deposit and CBDC,” Abate said.

Jeremy hinted that Circle is open to becoming a Federal Reserve-supervised entity if this step will fast-track the journey to becoming a full reserve digital bank.

“We want to be a full reserve digital currency bank. We’d like a framework for that to exist.”

USDC (USD Coin) Explained.

Center-issued stablecoin, USDC, is a joint venture between Circle and Coinbase. The stablecoin is backed by US dollar-dominated assets held at audited and regulated US financial institutions. It boasts a variety of use cases in the crypto market but is deployed in DeFi protocols by traders.

USDC, USDT and GUSD are designed to maintain a constant value of $1 at any given time. Stablecoins use a variety of mechanisms to peg their value with either commodities or fiat currencies. They are very important in the dynamic cryptocurrency market and help the holders in the ecosystem to benefit from its relative stability.

USDC was created by CENTRE, an organization founded by Coinbase and Circle. Each USDC is redeemable for its peg or a dollar-denominated asset proportionate with the value held in accounts at regulated US financial institutions. And these accounts are audited by the US accounting firm Grant Thornton LLP which issues monthly corroboration on reserves backing USDC.