Financial security is at the core of Circle’s business, helping increase dollar liquidity around the world while maintaining some of the highest standards for transparency, financial risk management and compliance in the industry. We work to carefully manage the reserves that back our digital currencies, and believe that well-regulated payment stablecoins can help meaningfully reduce economic risk within the global economy.
As a financial technology company helping pioneer new, more efficient ways of moving value around the world, we strive to go above and beyond the requirements of existing money transmission laws that govern our business. However, regulation at the federal level is critical to ensuring that Circle can serve customers with as little financial risk and uncertainty as possible. As noted by Circle CEO Jeremy Allaire, jurisdictions all over the world are moving forward on digital currency regulation that will help bring digital currency payments into the mainstream:
In the Asia-Pacific region, countries like Singapore are developing regulations that will help unlock use cases that benefit from the speed, financial security and cost advantages of commerce powered by digital currencies as a component of global financial infrastructure.
Managing USDC reserves
Circle operates a unique business that directs our focus towards minimizing financial risk for our customers. This model stands in contrast to traditional banks many people are familiar with in the economy today, which take on risk (with customer deposits) to generate business profits, as explained by Circle CFO Jeremy Fox-Geen:
The composition of reserves backing USDC has evolved since launch in 2018 and backed 100% by highly liquid cash and cash-equivalent assets and is always redeemable 1:1 for US dollars. As Fox-Geen explains, Circle continues to work to build a robust reserve structure that brings USDC to a risk profile akin to holding fiat U.S. dollars through relationships with world-class financial partners.
Digital currencies can help reduce risk
Financial businesses face a variety of independent and interlinked risks when providing services for their customers. Circle Chief Economist Gordon Liao noted that because of the concentration of reserves in short-dated U.S. Treasury bills, some of the most safe and liquid assets in the world, Circle operates with less risk exposure than many banks or financial institutions.
In addition to managing financial risks associated with USDC reserves and Circle’s operations, Liao also outlined how widespread adoption of digital currencies can reduce risk to the financial sector by unbundling banking risk from payment risk.
Financial security for institutions relies on a dedication to compliance and financial risk management that represent top priorities for Circle, within our operations and how we make decisions about USDC reserves and in how we engage with policymakers in jurisdictions all over the world.
By working hard to minimize risk for our customers and partnering with world-class financial institutions, we envision a world where digital currencies help make global commerce faster, more convenient and more cost effective than ever before.