The Structure and Management of USDC Reserve: Everything You Need to Know

On March 29th, Circle disclosed in a blog post “the structure and management method of the USDC reserve.”. According to the article, about 80% of the USDC reserves are short-term U.S. treasury bond, and about 20% are cash deposits in the U.S. banking system. Reserves are fully transparent and subject to third-party guarantees of sufficient assets to meet liabilities. It does not include any other assets with different risk profiles. The treasury bond in the USDC reserve is held by the wholly-owned government monetary fund structure supervised by the SEC. They are not subject to any locking or redemption thresholds. There are independent third-party reports on this portfolio on a daily basis, specific to each security.

Circle: 80% of USDC reserves are short-term US bonds, 20% are cash deposits, and most of them are deposited with GSIB banks

Introduction

On March 29th, Circle, the company that issues and manages the USDC stablecoin, released a blog post revealing the structure and management method of the USDC reserve. This decision was taken to increase transparency and provide a better understanding of how USDC is backed.

What is USDC?

Before diving deeper into the reserve structure, let’s first define USDC. USDC is a stablecoin pegged to the US dollar. It enables users to transact and store US dollars without having to rely on traditional banking channels, making it an attractive option for those who want to avoid market volatility.

The USDC Reserve Structure

According to the blog post, the USDC reserve currently consists of two primary asset types: short-term US treasury bonds, and cash reserves held in the US banking system.
* Roughly 80% of the USDC reserves are short-term US treasury bonds, which are held by the wholly-owned government monetary fund structure supervised by the SEC. This structure provides USDC with a high level of security, making it less susceptible to market fluctuations.
* The remaining 20% of the reserves are cash deposits held in the US banking system. These deposits are made in top-rated US banks, ensuring safety and liquidity.
Furthermore, Circle ensures that its reserves are fully transparent and subject to third-party guarantees of sufficient assets to meet any liabilities. It does not include any other assets with different risk profiles, such as cryptocurrencies or stocks.

Independent Third-Party Reports

Apart from the transparency and security measures taken to ensure the safety of the USDC reserve, Circle also obtains independent third-party reports on the USDC reserve portfolio on a daily basis. These reports are specific to each security, making it easier to track the performance of the reserve.

Conclusion

In conclusion, the USDC reserve is structured in a way that ensures stability, security, and transparency. The use of short-term US treasury bonds and cash reserves held in the US banking system secures the stability of USDC. The risk posed by other volatile assets is avoided by restricting the reserve pool to top-rated assets. Furthermore, third-party reports on a daily basis ensure transparency.

FAQs

Q: Can the USDC reserve include other assets like cryptocurrencies?
A: No, the USDC reserve only consists of short-term US treasury bonds and cash reserves held in the US banking system, providing stability and security to the stablecoin.
Q: Is the USDC reserve subject to any locking or redemption thresholds?
A: No, the short-term US treasury bonds are held by a wholly-owned government monetary fund structure supervised by the SEC and are not subject to any locking or redemption thresholds.
Q: How often are independent third-party reports obtained?
A: Independent third-party reports are obtained on a daily basis for each security in the USDC reserve portfolio.