Circle releases report on state of the USDC economy

Circle has released the first-ever state of the USDC economy report entitled “State of the USDC Economy – Welcome to the Utility Value Phase of Digital Currency,” commemorating the company’s 10th anniversary and five years since the launch of the stablecoin.

State of the USDC economy 

As part of its 10th-anniversary celebration and five years of its stablecoin, Circle, the issuer of USD COIN (USDC), has released the first annual State of the USDC Economy report, detailing the significant milestones of the project over the years, the growth potential of its digital assets and more.

At a time when financial regulators across the world have tightened the noose on private stablecoins due to bad examples laid by catastrophic projects like Do Kwon’s failed Terra UST algorithmic stablecoin last year, Circle claims it follows several stringent processes to ensure its stablecoins always maintain parity with their underlying fiat currencies.

As stated in the 28-page document, Circle claims more than $213 billion worth of USDC has been redeemed as of 2022.

The firm says the sustainability of its leading stablecoin product and its constant parity with the United States dollar over the years is due to several key principles inculcated by Circle, including putting in place a resilient and world-class system of risks and treasury management and fostering transparency through independent oversight.

Circle says about 80% of the USDC reserves are held in “price-stable and liquid” 3-month U.S. Treasuries, which it plans to move into the BlackRock-managed Circle Reserve Fund by the end of this month. The Bank of New York Mellon is the custodian of the fund.

Circle claims it holds roughly 20% of its reserves in cash diversified among eight regulated financial institutions in the U.S., including a Circle Impact program dedicated to allocating a share of reserves to “underrepresented community banks and minority depository institutions (MDIs).

Regulatory compliance and transparency 

While the current crypto market uncertainty has made some audit firms stop servicing web3 businesses, Circle has clarified that Grant Thornton has fully audited its operations and USDC reserve. However, Deloitte will function as its audit partner going forward.

“We have been audited by Grant Thornton, and those audits cover the USDC reserve. The audits for 2019, 2020, and 2021 (to U.S. public company standards) have been filed publicly with the U.S. Securities and Exchange Commission (SEC). Going forward, Circle and the USDC reserve will be audited by Deloitte.

We are committed to continually enhancing our disclosure regarding the USDC reserve. The Circle Reserve Fund, an SEC registered 2a-7 government money market fund, wholly owned by Circle, offers daily disclosure of the fund’s holdings of U.S. treasuries comprising the USDC reserves, subject to the independent oversight of BlackRock and the fund of the Board.”

Circle.

In terms of regulatory compliance, Circle takes its anti-money laundering (AML), Countering the Financing of Terrorism (CFT), and sanctions obligations seriously, as evidenced by the firm’s recent restriction of fund transfers from sanctioned Tornado Cash addresses. 

The firm also highlighted some of the important steps it has taken so far to foster financial crime compliance and preserve individual privacy, including launching the Travel Rule Universal Solution Technology (TRUST) in Feb. 2022, a platform that enables crypto exchanges to comply with the statutes of the Financial Action Task Force (FATF) Travel rule while protecting the security and privacy of customers.

Circle says its USDC circulation has grown from $0 to $45 billion in four years with the stablecoin now available on eight major blockchains, including ethereum, solana, and polygon. The firm attributes this success to its collaboration with developers and innovators committed to redefining money, payments, and finance with digital dollars like USDC.

Going forward, Circle says it plans to empower millions of developers in rewiring the global financial system. As part of that initiative, the company will be giving out $10,000 in USDC grants to ten students studying Web3 solution development. 

Circle has also joined forces with the Crypto and Blockchain Economics Research Forum (CBER) to launch the Circle Insight Award, to recognize outstanding academic papers that proffer solutions to real-world problems with blockchain technology.

The awards range from $,5000 to $10,000 per recipient and will be announced during CBER’s annual conference later in May 2023.