Circle Reserve Fund Protects USDC Reserves With $8.7B In Overnight Repo Agreements

Key Points:

• Circle Reserve Fund has added $8.7 billion in overnight repo agreements to its USDC reserves to reduce exposure in the event of a potential US debt default.

Circle Reserve Fund adds $8.7B in overnight repo agreements to USDC reserves, reducing exposure to potential US debt default.

The Circle Reserve Fund, managed by global investment management giant BlackRock, added $8.7 billion in overnight repurchase (repo) agreements to the portfolio as of May 16. This move provides additional protection for the USDC reserve in the unlikely event of a U.S. debt default.

Overnight repo transactions are short-term collateralized loans where the borrower sells security, in this case, U.S. Treasuries, for cash, and agrees to buy back the collateral the next day for a slightly higher price. Big institutional investors with cash to spare park their funds with Wall Street dealers that need funding. The collateral for any such repo transactions excludes securities maturing within three days.

The US Treasury Department is set to run out of cash by early June unless the debt limit is raised. As a result, Circle’s fund ditched Treasurys that mature beyond the end of this month and rotated the assets into cash or government repo transactions. This move is designed to reduce Circle’s exposure through a potential breach of the ability of the U.S. government to pay its debts.

Circle’s decision is interesting, given that it is one of the largest stablecoin issuers that backs its USDC with real-world assets. The move to repo transactions implies that Circle is more concerned about the safety and liquidity of its assets than the yield they generate.

However, the impact of this move on the crypto market is unclear. The USDC is a critical part of the crypto ecosystem, as it is used as a stablecoin pegged to the US dollar. Any significant changes to the reserve could impact the stability of the ecosystem.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

Join us to keep track of news: https://linktr.ee/coincu

Thana

Coincu News