JAKARTA - The stablecoin publishing company Circle has taken strategic steps by rotating its holdings into a tri-party repo involving key banks such as Goldman Sachs, BNP Paribas, Bank of America, and the Royal Bank of Canada. This step was taken to maintain the stability and security of their stablecoins, USD Coin (USDC).
For information only, Tri-party repo refers to a financial transaction in the capital market where securities sellers (loans) sell assets to third parties who act as agents, who then resell the assets to sellers at previously agreed prices. This third party is usually a large bank or financial institution that acts as a transaction settlement agent.
In the tri-party repo, securities sellers provide assets in the form of debt securities or other financial instruments as loan guarantees, while third parties act as intermediaries to ensure smooth and transaction security.
In an effort to strengthen their reserves, Circle chose to continue purchasing US debt securities as a reserve asset. This move demonstrates their commitment to ensuring USDC's strength and reliability. US bonds are considered a safe and secure investment because they are supported by the credit eligibility of the US government.
Previously, Circle had liquidated all of its holdings last month, which may have been affected by uncertainty surrounding the US debt ceiling deadlock. However, they have now rotated their holdings into a tri-party repo with leading banks. This tri-party repo allows Circle to manage liquidity and optimize asset use in a safe manner.
The decision to continue the purchase of US debt securities and conduct a tri-party repo with important banks is a wise step in dealing with uncertain periods. Circle wants to ensure the safety and stability of its reserve assets when facing risks that may arise due to changes in financial market conditions.
On June 3, an agreement to increase the state debt limit was finally reached by US lawmakers, avoiding potential financial disasters. This provides relief and restores trust in the financial market. This resolution provides the necessary guarantees for Circle to continue normal operations and re-evaluate its reserve holdings.
Circle has added their funds by incorporating USD 2.2 billion in debt securities. More than 90 percent of the total assets of the fund, which reached USD 24.7 billion, came from a tri-party repo. This move demonstrates Circle's commitment to maintaining USDC stability and security as one of the trusted stablecoins in the cryptocurrency market.
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