Circle Adjusts Treasury Holdings to Avert US Default Risk
• Circle has adjusted its treasury holdings to protect the reserves of its USD Coin stablecoin in response to US debt default concerns.
• The company has stopped investing in treasuries that will mature later than early June.
• Tether also has reduced its reliance on U.S. treasuries and increased its holdings of U.S. treasury notes with a maturity of fewer than 90 days to $53 billion.
Circle Rebalances Treasury Holdings
Amid increasing concerns about a possible US government default, Circle, a prominent stablecoin producer, has decided to adjust its treasury holdings by keeping a reserve portfolio heavily weighted toward short-term US treasuries with a maturity date of May 31 or earlier. This move is intended to protect the $30 billion reserves of its USD Coin stablecoin and reduce vulnerability to market volatility caused by a potential US default.
Tether Also Reduces Reliance on US Treasuries
Following suit, the biggest stablecoin operator Tether has also chosen to reduce their reliance on US treasuries and increase their holdings of US treasury notes with a maturity of fewer than 90 days up to $53 billion. This decision was made out of worry for the potential impact that shockwaves in the market might have if there were an actual default by the US government, which could cause widespread confusion and disarray throughout the global financial system.
Circle’s Reserves Vulnerable to Market Volatility
This action comes after it was discovered that $3.3 billion of Circle’s reserves used to underpin their USD Coins were kept at Silicon Valley Bank before it closed down in March 2021, causing temporary loss for the token’s 1-for-1 peg against the dollar as well as demonstrating how vulnerable Circle’s reserves are to market volatility when exposed too much risk.
Argument Rages On Amid Debt Limit Debate
The debate around raising the debt limit continues among financial experts as house speaker Kevin McCarthy proposed legislation that would increase borrowing ceiling by $1.5 trillion while slashing expenditure by $4.5 trillion and receiving criticism from Democrats alike while Federal Reserve chair Yellen emphasises dire consequences should legislators fail to lift said debt limit..
President Biden Meets With Congressional Leaders
President Joe Biden met with congressional leaders recently regarding this matter but ended without any clear progress being made towards resolving it anytime soon, leaving uncertainty over what will happen next hanging in air until further news emerges on this issue..