USDC issuer channels $8.7 billion into repos as a hedge against a US default

The issuer USD Coin (USDC) Circle transferred $8.7 billion into backing for the stablecoin from T-Bill maturing after May 31 into an overnight repo.

The reserves are managed by BlackRock Advisors through Circle Reserve Fund.

As counterparties for the transactions, the structure selected BNP Paribas, Morgan Stanley, Goldman Sachs, Bank of America, Barclays, Credit Agricole, Wells Fargo and Royal Bank of Canada.

The share of REPO transactions in Circle Reserve Fund reached 35.12%.

“Although this plan has been in place for many months, the inclusion of these highly liquid assets also provides additional protection for USDC reserves in the unlikely event of a US government default,” explained CoinDesk spokesperson Circle.

Earlier, Circle CEO Jeremy Allaire said the company revised the collateral structure for the stablecoin in favour of short T-Bills to hedge against such risks.

The situation has escalated amid the no progress on raising the US debt ceiling. The Treasury’s funds could run out by June 1, 2023.

Tether Limited said it is considering increasing the share of REPO in collateral for the stablecoin.