Circle Relocates USDC Reserve to BlackRock Fund

Jeremy Fox-Green, the Chief Financial Officer of Circle, a peer-to-peer payments technology company and the issuer of the United States dollar-backed stablecoin USDC announced that investment in the Circle Reserve Fund has commenced in collaboration with American multinational investment company BlackRock. 

Markedly, the Circle Reserve Fund was launched earlier with BlackRock and managed by its advisors. So far, Circle has been the only eligible investor in the Rule 2a-7 government money market fund.

As per the Circle Trust and Transparency series, the USDC reserve was designed to minimize different kinds of risk including liquidity, counterparty, operational, and reputational, giving investors confidence about the stability of the holdings and their redeemability. 

Therefore, a portion of the reserve is being moved to a dedicated fund that is registered with the U.S Securities and Exchange Commission (SEC).

Circle’s Full Reserve Transition Slated For Q1 2023

As it has always been, the reserve will be composed of approximately 20% cash which will be held in partners’ banks, allowing holders to easily redeem their USDC anytime while 80% will be short-duration U.S. Treasuries. Ultimately, Circle with the help of BlackRock is looking to fully transition to the Federal Reserve’s reverse-repo program by March 2023.

“As our existing Treasury holdings mature, the proceeds will be used to purchase new Treasuries by the Circle Reserve Fund. We began this process on November 3, 2022, and expect to be fully transitioned by the end of Q1 2023. The Fund is custodied at Bank of New York Mellon, which already serves as the custodian for the Treasuries that comprise the USDC reserve today,” said the CFO of Circle

Seeing that the Circle Reserve Fund is in compliance with the Investment Company Act of 1940, it is required that the portfolio holdings will be declared daily.

It is also answerable to an independent board. More than a month ago, Circle announced the expansion of the USDC to five blockchains; Arbitrum, Cosmos, NEAR, Optimism, and Polkadot.

On the other hand, Circle’s relationship with BlackRock began in April when the assets manager contributed to its $400 million funding round alongside other industry heavyweights like Fidelity Management and Research, Fin Capital, and Marshall Wace. it was only after this fundraiser that BlackRock formed a strategic collaboration with Circle to operate as its principal asset manager for USDC cash reserves.