Circle begins transferring USDC collateral assets to BlackRock fund

Circle Internet Financial is moving USDC collateral to an SEC-regulated money market fund early next year.

According to Circle’s official announcement, the dedicated fund established by BlackRock and registered with the U.S. Securities and Exchange Commission (SEC) will become the new custodian for USDC collateral assets. The fund operates under the name Circle Reserve Fund, which is a government money market fund, managed by BlackRock Advisors. This asset transfer process will be completed by the end of March 2022.

Circle’s CFO, Jeremy Fox-Geen, said all of the company’s short-term reserve assets will be put into this fund. Cash reserves, currently about 20%, will still be held at partner banks, making it easier for customers to swap USDC.

But this is only a temporary measure, Green added, because the ultimate goal is to put funds into the Federal Reserve’s reserve-repo program. Fox-Geen hopes Circle’s cash reserves are ultimately held at the Fed.

These efforts are aimed at “improving the risk and public opinion surrounding USDC reserves,” according to the sharing. As of October 27, Circle’s current circulation is $43.9 billion backed by $44.1 billion in cash and a variety of short-term government bills. Of that, about $8.4 billion in cash is being held in bank accounts like New York Mellon. The company will also be subject to the Investment Company Act of 1940, which requires an independent board of directors and daily portfolio reporting.

Financial giant BlackRock is currently the platform for Circle. The two had previously established a financial relationship since a $400 million funding round in April. Issuers in the United States are waiting for a formal regulatory framework for stablecoins. But it seems that the bill will not be able to finish this year. Policymakers generally agree that stablecoins that want to operate in the US need to be fully backed by reserves such as treasury bonds.