U.S. Circle Inc. converts 1.2 trillion yen worth of USDC reserves from government bonds to gensaki transactions


Prioritize protection of reserves

It turned out that the US company Circle, which issues the US dollar-linked stablecoin USDC, has changed the composition of its reserves in preparation for the risk of the US government defaulting on its debts. A spokeswoman for the company said it has converted short-term government bonds maturing after May 31 into cash and overnight repo transactions.

USDC’s reserves are now held in the Circle Reserve Fund, a sovereign money market fund managed by BlackRock.

What is a sovereign money market fund?

MMFs are investment trusts that manage highly stable values ​​such as government bonds and commercial papers. It aims to provide investors with low risk and high liquidity. Among them, sovereign money funds invest more than 99.5% of total assets in cash and government securities with repurchase conditions.

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connection:BlackRock launches USDC reserve fund

The fund has a scale of about $26.7 billion (3.67 trillion yen) as of the 16th, and consists of 64.88% of US short-term government bonds and 35.12% of government bond Gensaki transactions. About $8.7 billion (¥1.19 trillion) of overnight repurchase agreements (repos) were added to the portfolio.

It also includes tri-party repos, where a third party provides services such as delivery processing, with participation from major banks such as BNP Paribas, Goldman Sachs and Barclays.

A Circle spokesperson said plans were underway to change the composition of the portfolio for several months.

The inclusion of such highly liquid assets could provide additional protection for USDC reserves against the unlikely event of a US Treasury default.

The likelihood of a US government default

Circle CEO Jeremy Alaia said in an interview with US political news outlet Politico that the company has not held any US Treasury bonds due to mature after early June to avoid the impact of a US government default. said.

We do not want to be exposed to the possibility of the US government defaulting on its debt payments.

Treasury Secretary Janet Yellen warned on Thursday that the U.S. Treasury could default as early as next month unless Congress raises the debt ceiling. Furthermore, if the U.S. government defaults on the 16th, more than 8 million Americans will lose their jobs, a major blow to their household budgets, and a significant drop in stock prices, leading to major economic and social disruption. warned again. She called on Congress to resolve the issue of raising the debt ceiling as soon as possible.

President Biden and Republican House Speaker McCarthy met at the White House on the 16th to raise the debt ceiling, but did not reach an agreement. However, with Mr. Biden showing willingness to accept some of the spending cuts presented by Chairman McCarthy as a condition for the hike, there is a possibility that the talks that had been following a parallel line will come to an agreement.

At a press conference on the 17th, President Biden said he was confident of a deal on raising the limit. House Speaker McCarthy also said the United States would not default on its debts and said a deal within the week was “workable”.

connection:NY Dow and cryptocurrency-related stocks rebound sharply, fear of US default receding | 18th Financial Tankan

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