USDC Stablecoin Reserves Breakdown July 2021

For those following stablecoin, Centre (founded by Circle) has released another breakdown of USDC reserves as of July 16, 2021. The accounting firm Grant Thornton attests that the total fair value of US dollar denominated assets held in segregated accounts are at least equal to the now $22.2 billion of USDC in circulation. Here is their breakdown of the reserves:

I honestly don’t see why they don’t just keep it all in cash. If they maintain the highest level of trust, they can make so much money elsewhere. Yet, while I am not a fan of seeing the 9% in commercial paper and 5% in corporate bonds, this breakdown is much better than Tether (USDT) reserves breakdown. Tether reported only 3% in cash and 65% in commercial paper, which would make it one of the the largest commercial paper holders in the world, yet nobody has any idea whose paper they own! I’m disappointed in USDC, but I would never actually own USDT.

Bloomberg’s Matt Levine has observed that “most of what actually happens with Bitcoin is about rediscovering financial history and re-creating the traditional financial system from scratch.” The same goes for stablecoin deposits, as we are seeing banking without FDIC insurance to even the playing field amongst big and small banks (and protect individual depositors). As in the past, since there is the chance of a “bank failure” and/or fraud, people demand higher interest for higher risk, while the safer places can get away with paying less interest. Consider the current interest rates on USDC deposits:

• 4% APY from Coinbase (~$50 billion valuation)
• 7.5% APY from Blockfi (~4 billion valuation)
• 9% APY from Voyager (~2 billion valuation)

Although if we keep following that history model, then at some point there will be a stablecoin crisis where some portion of folks will lose money, leading to much tighter regulations about maintaining reserves, etc.

The poor transparency about stablecoin reserves and the lack of FDIC-insurance are why I don’t list these APYs in my monthly updates on the best rates on cash. You must perform your own due diligence on stablecoin risks.