USDC stablecoin could get indirect access to the Federal Reserve’s risk-free liability, as its partner BlackRock is set to apply for the Fed’s reserve repo (RRP) program.
Circle CFO Jeremy Fox-Geen recently announced that the stablecoin issuer had started investing in the Circle Reserve Fund.
The Circle Reserve Fund is managed by BlackRock, which qualifies Circle as an indirect investor in the government money market fund. The reserve will comprise 20% cash held at the Bank of New York Mellon, and 90% short-term U.S. Treasuries.
Fox-Green said that the reserve fund will increase investors’ confidence in the stability and redeemability of their USDC holdings, 1:1 for U.S. dollars at any time.
Circle said that it will convert all its existing Treasury holdings into the Circle Reserve Fund by the end of March 2023.
Circle to get indirect access to Fed’s RRP
Barclays Strategist Joseph Abate wrote that BlackRock plans to use Circle’s Reserve Fund to apply for access to the Federal Reserve’s overnight reverse repurchase (RRP) facility.
A reverse repurchase (RRP) is a monetary instrument that allows the Federal Reserve to sell a security to an eligible party, with an agreement to repurchase the same security at a later date.
The RRP access will give Circle indirect access to a risk-free central bank liability.
“This makes USDC an intriguing non-bank hybrid between an insured deposit and CBDC,” Abate said.
Circle CEO Jeremy Allaire said in a CNBC interview that his company was looking to become a full reserve digital bank.
“We want to be a full reserve digital currency bank. We’d like a framework for that to exist,” said Allaire.All Posts
According to Allaire, Circle was open to being a Federal Reserve-supervised entity if that will fast-track its journey to becoming a full reserve digital bank.