Circle Backs USDC With Shorter US Treasurys, Worries US Government Will Default

The US has never “intentionally defaulted on obligations” before, but that’s not stopping Circle from preparing for the worst

article-image

Jeremy Allaire Circle CEO (CC BY-NC-SA 2.0); Source: World Economic Forum / Faruk Pinjo, modified by Blockworks

share

Circle CEO Jeremy Allaire is prepping for a possible US debt default. 

Allaire told Politico that Circle no longer holds Treasurys that mature beyond early June, because the stablecoin issuer doesn’t “want to carry exposure through a potential breach of the ability of the US government to pay its debts.”

Circle issues its stablecoin USDC, which has a market cap of $30.1 billion. 

According to BlackRock, none of Circle Reserve Fund’s Treasurys mature past May 31.

“As part of ongoing positioning to enhance cash and liquidity management of the Circle Reserve Fund, in accordance with the Fund’s prospectus, BlackRock has entered into overnight U.S. Treasury repurchase agreements, or ‘repo’, in the Fund (USDXX),” a Circle spokesperson told Blockworks via email.  

That plan has been “underway for many months,” according to the spokesperson, adding that “the inclusion of these highly liquid assets also provides additional protection for the USDC reserve in the unlikely event of a U.S. debt default.”

A US Treasury bill is a short-term government debt obligation backed by the US Treasury. Typically, the maturity on the bill ranges from four weeks to 52 weeks.  

The US is at risk of defaulting on the national debt if Republicans and Democrats cannot reach a deal. Both sides need to raise the debt ceiling to avoid a default.

Treasury Secretary Janet Yellen warned in early May that failing to raise the debt ceiling could lead to an “economic catastrophe.”

The deadline for the raise could come as soon as June 1 after federal tax revenues in April came in below their previous projections.

The US has never “intentionally defaulted on its obligations because of the debt limit,” according to a 2021 White House blog post

If the US were to default, then payments and other core functions of the federal government, including lending, would be unable to function. 

Though Allaire’s comments show concern for the potential of a US debt default, Avi Felman and Jonah Van Bourg told Blockworks on the 1000X podcast that there may be an opportunity for crypto.

Updated May 10, 2023 at 6:21 pm ET: Adds comment from a spokesperson for Circle.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Salt Lake City, UT

MON - TUES, OCT. 7 - 8, 2024

Blockworks and Bankless in collaboration with buidlbox are excited to announce the second installment of the Permissionless Hackathon – taking place October 7-8 in Salt Lake City, Utah. We’ve partnered with buidlbox to bring together the brightest minds in crypto for […]

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Permissionless is a conference for founders, application developers, and users. Come meet the next generation of people building and using crypto.

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Monad Report Graphic.png

Research

Monad represents an ambitious attempt to address the scalability challenges faced by existing EVM chains. By leveraging innovative consensus and execution mechanisms, including pipelined consensus-execution and optimistic parallel execution, Monad aims to achieve performance metrics of 10,000 TPS and 1-second finality while maintaining full EVM compatibility. This approach positions Monad as a potential evolution of the Ethereum ecosystem, offering enhanced scalability without sacrificing the familiar developer or user experience.

article-image

Bitwise took the initial steps for an XRP ETF Wednesday

article-image

Plus, enrollment for the Donald Trump-backed crypto project is underway

article-image

On Solana so far, there are two main competitors: Jito and Solayer

article-image

Plus, Sui-eet liquidity surge and USDC’s new home on Base

article-image

The Web3 community is stacking bricks when it should be building bridges