announced Circle, the company behind the Boston-based digital stablecoin USDC, has announced that it will change the composition of the USDC reserve to cash and short-term US Treasuries.

According to Grant Thornton’s testimony, USDC expanded beyond cash and cash equivalents already in May 2021, and with the increasingly sophisticated regulatory landscape and scrutiny of the ecosystem, Circle provided a detailed report on its reserve composition.

Previously, the digital stablecoin was backed by the US dollar at a ratio of 1:1 and cash made up more than 60% of its entire reserves.

The remaining 40% was backed by various short-term Treasuries.

Compliance with regulations:

Amid heightened regulatory scrutiny by the authorities, stablecoin issuers are required to regularly submit detailed reports to build up their reserves.

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To keep pace with this evolving regulatory landscape, Circle announced the formation of its USDC reserve on Sunday.

Coinbase and Center, a consortium set up by Circle, noted that with community belief, commitment to transparency, and a vision of an evolving regulatory environment, Circle will hold its entire USDC reserve in cash and short-term US Treasuries with the support of Center and Coinbase.

According to the company, the changes will be implemented promptly and will be noted in future certifications by Grant Thornton.

Importance of disclosing USDC reserves:

While cryptocurrency volatility has risen to a higher degree, more and more people are choosing to put their money into stable digital currencies.

Nowadays, it is used as a substitute for cash and is treated as a store of value.

It should be noted that Tether is the largest stablecoin by market capitalization, followed by USDC.

In July of this year, Tether was examined by regulators because there were not enough assets to support its dollar peg.

Tether executives report that only 2.9% of their reserves are in cash.

The rest is of different origins.

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It is worth noting that commercial paper is a type of unsecured short-term debt which is considered more risky than government bonds.

All this drew close attention from the organizers.

At their most recent policy meeting, Federal Reserve officials emphasized that stablecoins pose a threat to financial stability and should be regulated.

Many experts see Circle’s recent move as an effort to comply with regulations and a way to address the company’s ambiguity in the fast-growing cryptocurrency world.

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