In a recent blog post by Circle, the issuer of the fastest-growing stablecoin USD Coin revealed the various sources of backing that underpin its stablecoin USDC.

According to the report and attestation by Multinational tax advisory firm Grant Thorton conducted the audit, the report published on July 20 showed that 61% of USDC’s reserves were held in cash and cash equivalents equating to $13.4 billion, as of May 28.

Stablecoins have continued to play a critical role in the continuous growth of the cryptocurrency sector as they help investors gain exposure to digital assets without necessarily operating a fiat account.

Stablecoins are pegged to the price of a fiat currency—in this case, the U.S. dollar—using matching currency-denominated assets that are held in segregated accounts by the issuer. The total value of assets held in these accounts must be equal to (or greater than) the number of the issuer’s stablecoins currently in circulation.

Per the report, Circle held $22,176,182,251 in its account at the time of the report. Grant Thornton accountants verified that the figure equated to exactly one dollar for every USD Coin in circulation. Further breaking this down reveals that more than 60% of that number, representing $13.4 billion, is held in cash. A quarter of the total reserves are split between Yankee Certificate of Deposits—a type of savings vehicle denominated in dollars—which account for $2.9 billion, and U.S. Treasury securities, which account for $2.7 billion. The remaining 14% is split between commercial paper and corporate bonds.

Circle’s USDC reserve update should make Tether, issuer of USDT stablecoin very worried right now. Tether’s arch-rival’s update  is already eliciting positive response from the community in contrast to how the ecosystem took Tether’s first-ever reserve update back then in May. Per that report, 76% of its reserves were held in “cash or cash equivalents”, with the remaining portion held in secured loans, bonds and other investments—including Bitcoin. But that wasn’t really the subject of controversy except that of the 76%, commercial paper and fiduciary deposits made up 65% and 25%, respectively; the figures indicated that less than 3% of Tether’s reserves were held in cash.

Circle is already reaping the benefits of its radical transparency as USDT supply has been flat since June 1, while USDC supply has grown by roughly $4B from ~$22B to ~$26B just from a  distant $4.1 billion market cap in January. According to the reserve update, Circle pledged to maintain the highest levels of regulatory and prudential standards, which are currently in a state of uncertainty due to increased regulatory scrutiny of cryptocurrencies.

This report represents the thirty-third it has been issuing transparency report  since it began issuing USDC in 2018. Although it is not mandated that issues reserve report, Circle seems to be positioning itself to be on the favourable side of an impending stablecoins regulation spectrum. Just this week, Janet Yellen, Federal Reserve Chair Jay Powell and Securities and Exchange Commission (SEC) Chair Gary Gensler, Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), and Treasury officials retorted to an incoming stablecoins regulations.

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