Circle returns to the embrace of US Treasuries! Follow wherever the interest rates are high.

The issuer of stablecoin USDC, Circle, decided in May of this year to no longer hold any US government debt maturing after June due to concerns over the US debt ceiling issue, in order to avoid any compliance risks. However, just a few weeks after the crisis was resolved, Circle returned to holding US government debt as US bond yields rose.

Circle Resumes Holding U.S. Treasury Bonds

According to a report by CoinDesk, Circle's Chief Financial Officer, Jeremy Fox-Geen, stated during this week's company conference call that the Circle Reserve Fund managed by investment firm BlackRock is in the process of establishing direct holdings in U.S. Treasury bonds.

At the same time, they will also retain some repurchase agreements (Repos) in their investment portfolio.

Details of Circle's Repurchase Agreements

Despite the resolution of the U.S. debt ceiling crisis at the beginning of June, Circle has chosen to continue converting reserves into repurchase agreements. While not explicitly stated, the interest rate on the repurchase agreements was about 1% higher than the return on the two commodities, which effectively boosts Circle's revenue.

However, looking at the current reserve assets of Circle, the interest rates on short-term U.S. Treasury bonds have slightly exceeded those of the repurchase agreements. This helps explain why Circle has decided to hold U.S. Treasury bonds once again.