NY Fed New Rules Cast Uncertainty on Circle’s Access to Reverse-Repurchase Program

The New York Federal Reserve has updated its guidelines for counterparties looking to participate in its reverse repurchase agreements (RRP), casting uncertainty over Circle’s intentions to access the Fed’s system. The changes to the guidelines could potentially hinder Circle’s chances of gaining access to the Fed’s reverse-repurchase program, where the Fed sells securities to eligible counterparties with an agreement to repurchase them at the maturity date. The Circle Reserve Fund, a money market fund managed by investment management firm BlackRock, is one such 2a-7 fund that is only available to Circle and could be deemed ineligible under the Fed’s updated guidelines.

According to the New York Fed, accessing such a system “should be a natural extension of an existing business model, and the counterparty should not be organized for the purpose of accessing RPP operations.” In other words, the Fed’s program is not intended for entities that are solely organized to access RRP operations. The regulations governing 2a-7 government money market funds are aimed at ensuring that these funds are able to meet potential redemptions by investors in a timely manner. Funds under this category must hold at least 10% of their total assets in daily liquid assets and at least 30% of their total assets in weekly liquid assets.

If approved, Circle would be able to earn interest on excess funds by investing in low-risk Treasury securities, allowing the stablecoin issuer to earn interest and help maintain the stability of its stablecoin, USD Coin (USDC). However, Circle’s access to the Fed’s reverse-repurchase program remains uncertain under the updated guidelines.

It is worth noting that Circle has been expanding its banking partnerships on a global basis since the depeg of USDC following the collapse of Silicon Valley Bank on March 10. The company has also turned its focus to having more banking partnerships to mitigate risks and uphold the redeemability of its coins for holders. Circle announced in November that it had begun investing part of its funds into the Circle Reserve Fund as a measure to mitigate risks and uphold the redeemability of its coins for holders.

Circle’s access to the Fed’s reverse-repurchase program would have allowed the company to further diversify its reserves and treasuries. As of now, Circle holds 80% of its reserves and treasuries. Despite Circle’s expanded ties with BNY Mellon and its new banking partnership with Cross River, the updated guidelines set by the NY Fed have created uncertainty over Circle’s access to the Fed’s reverse-repurchase program. The stablecoin issuer will need to explore other options to ensure the stability and growth of its stablecoin.


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Circle Launches Cross-Chain Transfer Protocol for USDC

Users are now able to move US Dollar Coin (USDC) between Ethereum and Avalanche thanks to the implementation of a new mainnet protocol by Circle, the company that created the US Dollar Coin (USDC). The Cross-Chain Transfer Protocol (CCTP), which was introduced on April 26, intends to lessen the amount of fragmentation that exists within the Web3 ecosystem and do away with the need for USDC bridges.

Prior to this update, customers who owned USDC on Ethereum and wished to move it to Avalanche were required to either deposit their coins with a Circle partner or utilize a third-party bridge to complete the transfer. Nevertheless, customers are now able to transfer their USDC straight across the two networks thanks to the newly developed CCTP.

The new protocol operates in a manner that is distinct from that of a conventional bridge. Instead of putting a lock on tokens that are submitted to its contract, it will entirely destroy them and then issue fresh tokens on the network that is receiving them. Users have the ability to immediately convert these newly issued tokens into bank deposits by depositing them with Circle or one of its partners.

The Circle team anticipates that the CCTP will remedy the problem of fragmentation that exists within the Web3 ecosystem. At the moment, there are a number of unauthorised versions of USDC that are circulating on other networks. The majority of these versions are the consequence of tokens on one network being bridged to another network. The development team anticipates that the usage of unauthorised copies will gradually decrease now that there is an official means to move coins across networks. This will result in the token being easier to understand and utilize.

A significant number of the most prominent cross-chain protocols, such as Celer, Hyperlane, LayerZero, LI.FI, MetaMask, and Wormhole, as well as others, have already committed to making use of CCTP in the future. It is anticipated that the new protocol will get widespread adoption as a result of this support, which will further reduce the need for USDC bridges and facilitate the use of the token across other networks.

In the realm of decentralized finance (DeFi), the introduction of Circle’s new Cross-Chain Transfer Protocol represents an important step forward overall. This demonstrates both the rising desire for smooth interoperability across multiple blockchain networks as well as the willingness of prominent companies in the industry to cooperate in order to enhance the user experience for everyone. The future of DeFi is expected to become more linked and available to a larger audience as the number of projects that embrace cross-chain protocols like CCTP increases.


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US Draft Bill Proposes Framework for Stablecoins

A new draft bill published in the United States aims to provide a regulatory framework for stablecoins. The bill proposes that the Federal Reserve oversee non-bank stablecoin issuers such as Tether and Circle, which respectively issue USDT and USDC. Insured depository institutions seeking to issue stablecoins would fall under federal banking agency supervision.

The bill also establishes criteria for approval of stablecoin issuers, including the ability to maintain reserves backing the stablecoins with U.S. dollars or Federal Reserve notes, Treasury bills with a maturity of 90 days or less, repurchase agreements with a maturity of seven days or less backed by Treasury bills with a maturity of 90 days or less, and central bank reserve deposits. Issuers must also demonstrate technical expertise and established governance, as well as the benefits of offering financial inclusion and innovation through stablecoins.

Additionally, the bill proposes a two-year ban on issuing, creating or originating stablecoins not backed by tangible assets. It also mandates that the U.S. Department of the Treasury conduct a study on “endogenously collateralized stablecoins.” These are stablecoins that rely solely on the value of another digital asset created or maintained by the same originator to maintain the fixed price.

The bill also allows the U.S. government to establish standards for interoperability between stablecoins. It further determines that Congress and the White House would support a Federal Reserve study on issuing a digital dollar.

Stablecoins are a class of cryptocurrencies that attempt to offer investors price stability by being backed by specific assets or using algorithms to adjust their supply based on demand. The draft bill defines stablecoins and proposes a regulatory framework that could potentially provide greater stability and protection for investors. It also aims to prevent the use of stablecoins for illegal activities, such as money laundering and terrorist financing. If enacted, the bill would require stablecoin issuers to register and could result in up to five years in prison and a fine of $1 million for failure to do so.


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Banking crisis could push cryptocurrency regulation into gray area

The world has been facing a banking crisis that has caused a great deal of uncertainty and market anxiety. According to Circle CEO Jeremy Allaire, this could lead to increased regulatory ambiguity in the cryptocurrency market. Allaire expressed his concerns in a Twitter thread on March 23, discussing the aftermath of the collapse of the Silicon Valley Bank (SVB) and the general exposure of the financial system in the United States.

Allaire’s concerns are not unfounded, as the US banking system has faced several challenges in recent years, including the 2008 financial crisis and the COVID-19 pandemic. The collapse of SVB, a bank that primarily serves the technology sector, has only added to the worries about the stability of the financial system in the country.

As a result of the ongoing banking crisis, investors and businesses are becoming increasingly interested in cryptocurrencies as an alternative to traditional banking. However, the lack of clear regulation in the cryptocurrency market can lead to further uncertainty and risk.

Allaire believes that the current market dynamics could push the cryptocurrency market into a gray area in terms of regulation, as governments and financial regulators struggle to keep up with the rapid growth of cryptocurrencies. This could potentially lead to greater regulatory ambiguity and more risk for investors and businesses.

Circle is a cryptocurrency company that issues the USD Coin (USDC), a stablecoin that is pegged to the US dollar. The company has been actively advocating for more regulatory clarity in the cryptocurrency market to help promote growth and adoption.

In conclusion, the ongoing global banking crisis could have a significant impact on the regulation of cryptocurrencies. The lack of clear regulatory guidelines could create more uncertainty and risk for investors and businesses, making it essential for governments and financial regulators to act quickly to provide clarity and stability to the market.


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Circle’s Stablecoin USDC Affected by Collapsed Bank

Circle CEO and co-founder Jeremy Allaire revealed that the stablecoin issuer had been able to access its $3.3 billion in funds held with Silicon Valley Bank since March 13. Allaire stated that he believed that almost everything was able to clear from the failed lender. However, USDC briefly de-pegged following news of the temporarily locked funds, leading to a drop in the stablecoin’s market cap by almost 10% since March 11.

USDC’s dollar peg has since recovered, but mass redemptions have affected its market cap. In contrast, USDC’s peer, Tether, has recorded a slight increase in its market cap since March 11, climbing over 1% to $73.03 billion. Although the temporarily locked funds represented less than 8% of the token’s reserves, it had a significant effect on USDC.

The January reserve report released on March 2 asserted that USDC was over 100% collateralized, with over 80% of the reserve consisting of short-dated United States Treasury Bills, which are highly liquid assets that are direct obligations of the U.S. government and considered one of the safest investments globally. Despite the impact of the collapsed bank, the reserve report provides assurance that USDC remains backed by highly liquid assets and overcollateralized.

USDC is one of the most widely used stablecoins in the cryptocurrency market, with a market cap of over $10 billion as of March 2023. Stablecoins are a type of cryptocurrency that is pegged to the value of a fiat currency, usually the U.S. dollar, and are designed to provide a stable store of value that can be used for transactions without the volatility typically associated with other cryptocurrencies like Bitcoin.

The news of the temporarily locked funds at Silicon Valley Bank highlights the potential risks associated with stablecoins, which are often seen as a safer alternative to other cryptocurrencies due to their stable value. However, the fact that these coins are backed by fiat currency reserves means that they are only as safe as the financial institutions that hold those reserves.

In recent years, there have been several high-profile cases of stablecoin issuers facing regulatory scrutiny or experiencing issues with their banking partners. For example, in 2018, Tether, the largest stablecoin issuer at the time, faced allegations that its reserves were not fully backed by U.S. dollars as it had previously claimed. Similarly, in 2021, the stablecoin issuer Centre, which is backed by Coinbase and Circle, faced a lawsuit alleging that it had violated securities laws by failing to register its USDC stablecoin with the U.S. Securities and Exchange Commission.

Despite these challenges, stablecoins have become an essential part of the cryptocurrency ecosystem, providing a way for traders and investors to move funds between exchanges and participate in decentralized finance (DeFi) applications without the risks associated with traditional fiat currencies.

In response to the risks associated with stablecoins, regulators around the world are increasingly taking steps to provide more oversight and regulation of these assets. For example, in the U.S., the SEC has signaled that it may consider stablecoins to be securities, which would subject them to greater regulatory scrutiny. Similarly, in the EU, regulators have proposed new rules for stablecoins that would require issuers to be authorized and subject to ongoing supervision.

In conclusion, the news of Circle’s temporarily locked funds at Silicon Valley Bank highlights the potential risks associated with stablecoins, but the fact that USDC remains overcollateralized with highly liquid assets provides some reassurance to investors. As stablecoins continue to play a critical role in the cryptocurrency ecosystem, it is likely that regulators will continue to scrutinize these assets and develop new rules to ensure their safety and stability.


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Circle Partners with Cross River Bank for USDC Production and Redemption

Circle, a leading global crypto finance company, has announced that it has partnered with Cross River Bank for producing and redeeming USD Coin (USDC), its flagship stablecoin pegged to the US dollar. Cross River Bank is a recognized leader in providing banking services to fintech and crypto firms, including Visa and Coinbase. In addition to Cross River Bank, Circle has also expanded relationships with other banking partners to assist with USDC redemption, including Bank of New York Mellon (BNY Mellon), which already provides custody services for Circle’s reserves.

The announcement comes after a harrowing weekend that saw Circle’s flagship USDC stablecoin break its peg to the dollar, falling below $0.90 early on Saturday. However, a series of moves by banks and regulators restored confidence in the token, and at the time of publication, USDC has recovered and trades at $0.99.

During the weekend, Circle issued a press release confirming that 100% of USDC reserves are safe and secure. The company also announced that it would complete the transfer of the remaining Silicon Valley Bank (SVB) cash to BNY Mellon, and liquidity operations for USDC will resume at banking open on Monday.

Circle’s announcement also noted that it had no exposure to Silvergate, the crypto-friendly bank that announced it would voluntarily liquidate its holdings as part of a takeover process by federal regulators. This weekend’s USDC turmoil was part of a broader financial catastrophe that started due to the collapse of SVB, the 16th-largest bank in the United States and a financial pillar of the tech and venture capital world. The failure of SVB triggered a panic as thousands of companies, including Circle, could not access billions in deposits. However, the Federal Reserve and other agencies calmed markets by announcing that depositors at SBV would be made whole.

Circle’s partnership with Cross River Bank and other banking partners is a significant step towards strengthening the stability and reliability of USDC, especially in the wake of recent events. Cross River Bank has a reputation for providing banking services to fintech and crypto firms and has been recognized for its services to Visa and Coinbase. BNY Mellon, on the other hand, already provides custody services for Circle’s reserves, making it a natural fit for assisting with USDC redemption.

Overall, Circle’s partnership with Cross River Bank and other banking partners underscores the importance of reliable banking partnerships for the stablecoin industry, which is still in its nascent stages. As the industry grows and matures, more partnerships like these are likely to emerge, providing greater stability and reliability for stablecoins like USDC.


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Circle Plans to Cover USDC Shortfall After SVB Shutdown

Circle, the issuer of the stablecoin USD Coin (USDC), has announced that it will use corporate resources to cover the shortfall on its reserves after Silicon Valley Bank (SVB) was shut down by the California Department of Financial Protection and Innovation. USDC liquidity operations will resume as normal when banks open on Monday, enabling redemption at 1:1 with the US dollar. The stablecoin lost its $1 peg on March 11, trading as low as $0.87, due to the disclosure of $3.3 billion of Circle’s reserve held at SVB. (Read More)


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Circle’s USDC Reserve Exposure and Potential Risks

Circle is one of the largest issuers of stablecoins, with USDC being the second-largest stablecoin in circulation. As of January 31, 2022, the circulating supply of USDC was $42 billion. Stablecoins are digital currencies that are pegged to a stable asset, such as the US dollar, to reduce volatility. They are widely used in the cryptocurrency market for trading, remittances, and other financial activities.

To maintain the stability of USDC, Circle holds reserves in cash and US Treasurys, which are managed by BlackRock through the Circle Reserve Fund. According to the latest audit report, nearly 20% of Circle’s reserves, or $8.6 billion, were held in cash by US regulated financial institutions as of January 31. The rest of the reserves, or $33.6 billion, were held in US Treasurys managed by BlackRock.

While Circle’s reserves are held by several regulated financial institutions, the recent shutdown of SVB and the decision of Silvergate to shut down its crypto bank arm have raised concerns about potential risks for Circle and its stablecoin. SVB is one of the biggest lenders in the US and a major player for venture-backed companies, including many tech firms. The shutdown of SVB has fueled fears about its future and the potential impact on the companies it serves.

According to Weisberger, a blockchain and cryptocurrency consultant, many tech firms, including startups and big tech companies, have deep exposure to SVB. If the government does not step in and effectively carry out a bailout of some sort, these companies could struggle to pay their employees, leading to layoffs and rising unemployment.

In the case of Silvergate, the company’s decision to shut down its crypto bank arm has raised concerns about the stability of its operations and its ability to repay its depositors. However, Circle has denied having any current exposure to Silvergate and has transferred the small percentage of USDC reserve deposits held to other banking partners.

In conclusion, while Circle’s reserves are held by several regulated financial institutions, recent events such as the shutdown of SVB and the decision of Silvergate to shut down its crypto bank arm have raised concerns about potential risks for Circle and its stablecoin USDC. The cryptocurrency market is still largely unregulated, and the stability of stablecoins depends on the stability of the assets they are pegged to and the institutions holding their reserves. As the market continues to evolve, it will be important to monitor the risks and potential impacts on market participants, including issuers of stablecoins like Circle.


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Circle’s USDC Reserves Remain Stuck at SVB, Raises Concerns Over Crypto Stability

Circle is one of the leading issuers of USDC, and the company has been on a mission to make it the preferred stablecoin in the cryptocurrency space. However, recent developments have raised concerns over the stability of USDC and its issuers.

On March 10, Circle confirmed that $3.3 billion of its $40 billion USDC reserves held at Silicon Valley Bank (SVB) have not been processed, despite wires being initiated on Thursday to remove the balances. This has raised concerns over the stability of USDC and its issuers, as investors worry about the possibility of a sudden loss of value.

This development follows Circle’s disclosure in its latest audit that as of January 31, $8.6 billion, or roughly 20% of its reserves, was held in several financial institutions, including the recently bankrupted Silvergate and the now-shuttered SVB. This has raised questions over Circle’s risk management practices and its ability to ensure the stability of USDC.

Circle has assured investors that it is working to resolve the issue with SVB and that it is confident in the stability and liquidity of USDC. However, the incident has once again highlighted the need for increased regulation and oversight of stablecoins and their issuers.

The cryptocurrency industry has long been resistant to regulation, viewing it as antithetical to the decentralized and open nature of cryptocurrencies. However, incidents like this one highlight the potential risks and vulnerabilities of the industry, and the need for regulatory frameworks that can protect investors and ensure the stability of cryptocurrencies.

The stability of stablecoins like USDC is crucial to the development and adoption of cryptocurrencies, as they provide a less volatile alternative to Bitcoin and other cryptocurrencies. However, incidents like this one raise questions about the reliability of stablecoins and their issuers, and highlight the need for greater transparency and oversight in the industry.


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Circle Unable to Withdraw $3.3 Billion from SVB, Causing USDC Sell-Off

Circle is a Boston-based fintech company that provides payments and investment services using blockchain technology. USDC is a stablecoin issued by Circle and Coinbase, pegged to the value of the US dollar at a 1:1 ratio. It is one of the fastest-growing stablecoins, with a market capitalization of over $10 billion as of March 2022.

SVB is a California-based bank that provides banking services to technology and life science companies. It is one of the largest banks in the US and has been a key partner for Circle in managing its reserves. However, SVB recently announced that it would shut down its operations due to regulatory issues, leading to concerns about the fate of Circle’s reserves held with the bank.


On March 9, Circle initiated a wire transfer to withdraw its funds from SVB. However, two days later, Circle announced that the transfer was not fully processed, leaving $3.3 billion of USDC reserves with SVB. The news caused a sell-off of USDC, with the stablecoin’s value dropping below its $1 peg. As of March 2022, USDC was trading at $0.8774, a more than 10% drop from its value before the news.

The situation has raised concerns about the stability of USDC and the broader implications of SVB’s failure. In a statement, Disparte warned that SVB’s failure could have broader implications for the US economy, particularly for businesses, banking, and entrepreneurs. He called for a federal rescue plan to prevent further damage to the economy.


The situation also highlights the risks of using stablecoins, which are digital currencies designed to maintain a stable value. Stablecoins are often used in cryptocurrency trading and as a means of payment, but they are not immune to market fluctuations and other risks. The lack of regulation and oversight in the stablecoin market has also raised concerns about their stability and reliability.

In response to the situation, Circle has assured its users that their USDC holdings are fully backed by reserves held in other banks. The company has also said that it is working to resolve the issue with SVB and is exploring alternative banking partners. However, the incident has raised questions about the risks of using stablecoins and the need for greater oversight and regulation in the market.



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