CIRCLE INTERNET FINANCE PUBLIC LIMITED COMPANY (hereinafter 'Circle) is better known as being the issuing entity of the USDC stablecoin. According to Circle:

Circle is a global financial technology company helping money move at internet speed. Our mission is to raise global economic prosperity through the frictionless exchange of value.

[Circle. About Circle. (Accessed November 5, 2022)].

As regards USDC, the stablecoin issued by Circle:

USD Coin (known by its ticker USDC) is a stablecoin that is pegged to the U.S. dollar on a 1:1 basis. Every unit of this cryptocurrency in circulation is backed up by $1 that is held in reserve, in a mix of cash and short-term U.S. Treasury bonds. The Centre consortium, which is behind this asset, says USDC is issued by regulated financial institutions.

[CoinMarketCap. USDC. (Accessed November 5, 2022)]

As noted, every single USDC issued and is in circulation is fully backed by $1.00 US which is held in reserve in the form of a mix of cash and short-term US Treasuries. Now Circle is changing it’s existing method of maintaining this reserve opting for a new format.

In a blog post dated November 3, 2022, Circle’s CFO Jeremy Fox-Geen, announced:

Through our partnership with BlackRock, we have begun investing in the Circle Reserve Fund to manage a portion of the USDC reserves. We expect the reserve composition will continue to be approximately 20% cash and 80% short duration U.S. Treasuries. The Circle Reserve Fund is a registered Rule 2a-7 government money market fund managed by BlackRock Advisors, LLC and its portfolio will consist of cash and short-dated U.S. Treasuries.

[Circle. Deepening Our Partnership with BlackRock. (Accessed November 5, 2022)].

This new reserve fund with Blackrock has been in the works by both Circle and Blackrock since the initial attempt to register the same back in May, 2022. [See, e.g. Ansah, K. Circle Begins Putting Money into Its Reserve Fund, Plans to Have It Fully Stocked by 2023. (Accessed November 5, 2022)]. Circle is the sole eligible investor for this fund. As already noted herein, Circle has already commenced funding this new reserve fund and the joint estimation is that Circle will have ‘fully transitioned’ its reserves to the Blackrock fund by the end of March, 2023. [See, e.g. Hamilton, J. Circle Begins Putting Reserves Into New BlackRock Fund. (Accessed November 5, 2022)].

This new Circle Reserve Fund is fully compliant with the Investment Company Act of 1940, which requires it being subject to supervision by an independent board as well as the reporting of its portfolio holdings on a daily basis. [See, e.g. Attlee, D. Circle starts pouring money into its Reserve Fund, aims to fill it in 2023. (Accessed November 5, 2022)]. And according to Circle the assets in this Fund will be held with the same custodian bank currently holding the company’s reserves, the Bank of New York Mellon.

In an interview with CoinDesk, Fox-Geen noted “This is a wrapper for the USDC reserve that brings benefits of that wrapper to the USDC and the ecosystem” [Hamilton, supra]. He continued stating all of Circle’s short-term Treasuries will be transitioned into the new Blackrock reserve. However, the cash reserve (approximately 20% of the total reserve) will remain in the custody of Circle’s partner banks facilitating customer redemption of USDC around the clock.

Fox-Geen also has suggested that this move should be viewed as a temporary measure. Apparently it is the penultimate goal that Blackrock in the future apply to get the fund included within the Federal Reserve’s reverse-repo program. [for further information on the reverse-repo program see: Board of Governors of the Federal Reserve System. Policy Tools : Overnight Reverse Repurchase Agreement Facility. (Accessed November 5, 2022)]. Fox-Geen hopes to eventually see the Circle cash reserves held by the Fed suggesting that that scenario would “improve the risk profile and oversight and the disclosures around USDC reserve” [Hamilton, supra].

And quickly, just to provide an update on where Circle is going:

Circle stated in September that its stablecoin would soon be available on five other networks, including Polkadot, Optimism, Near, Arbitrum, and Cosmos. By the end of 2023, most of these blockchains will have support available, while USDC on Cosmos will launch at the beginning of 2023.Circle gained preliminary clearance for a major payments institution license in Singapore at the beginning of November, enabling it to issue cryptocurrency and facilitate local and international payments.

[Adeola, M. Circle Begins Funding Its Reserve Fund, Aims To Fill It In 2023. (Accessed November 5, 2022)].

Table of Authorities

• Adeola, M. Circle Begins Funding Its Reserve Fund, Aims To Fill It In 2023. (Accessed November 5, 2022)
• Ansah, K. Circle Begins Putting Money into Its Reserve Fund, Plans to Have It Fully Stocked by 2023. (Accessed November 5, 2022)
• Attlee, D. Circle starts pouring money into its Reserve Fund, aims to fill it in 2023. (Accessed November 5, 2022)
• Board of Governors of the Federal Reserve System. Policy Tools : Overnight Reverse Repurchase Agreement Facility. (Accessed November 5, 2022)
• Circle. About Circle. (Accessed November 5, 2022)
• Circle. Deepening Our Partnership with BlackRock. (Accessed November 5, 2022)
• CoinMarketCap. USDC. (Accessed November 5, 2022)
• Duongthaoan. Circle aims to fill its reserve by 2023. (Accessed November 5, 20220
• Hamilton, J. Circle Begins Putting Reserves Into New BlackRock Fund. (Accessed November 5, 2022)