Last week Circle, the issuer of the USDC stablecoin, called for the ability to hold stablecoin reserves at the Federal Reserve until wholesale central bank digital currencies (CBDC) are released when they can be used instead.
It’s been just ten days since USDC lost its peg after Circle revealed it had $3.3 billion stuck in the failed Silicon Valley Bank (SVB). It has since recovered following the FDIC’s willingness to cover all depositors, including those above the $250,000 ceiling. The stablecoin’s reserves are held 80% in U.S. Treasuries and 20% in bank deposits.
“In some ways, the events surrounding SVB act as a vindication of what we have been advocating for, and that is a full Fed reserve model, where we could have access to risk-free cash,” said Circle Senior Policy adviser Tarleton Watkins at a Warwick Business School event. While wholesale CBDCs provide an optimal backing asset, access to direct bank accounts in the interim would address the counterparty risk.
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