In November 2021, the total value of dollar digital currencies surpassed $127 billion, according to a U.S. Treasury Department report. It has kept going up. A month later, it’s more like $158 billion by CoinMarketCap’s count, up staggeringly from $28 billion in January. Of that total, $42 billion can be ascribed to USD coin (USDC), a project from Circle that for months has been among the 10 largest market capitalizations of any cryptocurrency regardless of category.
Now that we’re in the season of dollar digital currencies, Circle is working to make this innovation more accessible for B2B use around the world.
Since its 2018 launch, USDC has functioned as a medium of exchange in blockchain-based and other digital use cases in which fiat dollars are unavailable. The dollar digital currency offers low-cost and nearly instant value transfer; building on that utility, USDC can now also serve as the principle for crypto lending via Circle Yield.
Circle Yield offers an alternative to other fixed-income strategies. Investments in Circle Yield are made and paid in USDC, thus avoiding the complexity often found in typical crypto-based investments, but still offer interest returns well above those found in many low-risk corporate bonds or money market accounts. USDC, in turn, is fully backed by cash and equivalents and short-duration U.S. Treasuries, and attestation reports are published monthly by the Grant Thornton accounting firm regarding the reserve balances.
Circle Yield, then, is designed to offer time-limited investments in the crypto ecosystem, which are secured with bitcoin collateral. Such investments wouldn’t require exposure to volatile assets but can still outperform many traditional financial instruments.
How businesses use Circle Yield today
USDC is known to be well suited to typical crypto enthusiasts who want to make dollar-denominated deals. But what about venture capital firms? Family offices? Corporate treasuries? Portfolio managers employed by institutional investors might want to do the same as blockchain technology proliferates and new investment opportunities arise.
That’s where Circle Yield comes into play. It essentially securitizes USDC into an instrument that can only be marketed and sold to accredited investors, or those who meet Securities and Exchange Commission standards for wealth, liquidity and market sophistication.
“Corporate treasurers can maximize reserves while minimizing risks,” said Hannah Post, the Yield product specialist at Circle. “Yield offers returns much higher than what is currently available from most traditional financial institutions’ interest-bearing products and minimizes the complexity of accessing this new asset class by being able to fund the product directly from your Circle Account.”
Circle, the principal operator of USDC, offers Yield to corporate institutional investors. Yield, which is built on USDC and regulated by the Bermuda Monetary Authority, is fully secured with bitcoin collateral stored with a regulated, third-party financial institution.
With this infrastructure in place, Circle intends to expand the geographic reach of Yield from its initial launch in the U.S. and Switzerland to a broader set of jurisdictions.
As capital markets for dollar digital currencies like USDC prove their value to investors, more participants from financial institutions and other corporate players with idle treasury reserves are likely to join the growing wave of stablecoin users. It looks like dollar digital currencies still have a lot more growing to do in the years ahead.
*Offering subject to business approval, geographical availability and regulatory authorization, and there is no guarantee that the product will become available in a specific timeframe or to a specific customer or geography. Not currently available in the following U.S. states: Alaska, Minnesota, New York and Hawaii. Circle Yield product offered through Circle International Bermuda Limited (“Circle Bermuda”). Circle Bermuda has entered into lending arrangements with one or more institutional borrowers, including Genesis Global Capital, LLC. These lenders pledge and transfer Bitcoin into custody with a third party custodian as collateral for their USDC borrowings and Circle Yield investors benefit from a security interest in Circle Bermuda’s security interest in the pledged Bitcoin.
Circle Account and money transmission services are provided by Circle Internet Financial, LLC. Circle Internet Financial, LLC, NMLS # 1201441, is a licensed provider of money transmission services. A full list of Circle’s licenses can be found at https://www.circle.com/en/legal/us-licenses.
Circle is not a bank; your Circle Account is not a bank account, and any funds are not insured by the Federal Deposit Insurance Corporation, the Securities Investor Protection Corporation or by any U.S. or foreign government agency, insurance fund, person or entity. For investors in the United States, investments described in this communication are offered by Circle Bermuda to “accredited investors” only in accordance with Regulation D, Rule 506(c) of the Securities Action of 1933, as amended. While Circle Bermuda is regulated by the Bermuda Monetary Authority for digital asset business, Circle Bermuda is not engaged in banking and deposit taking activities and is not regulated for these purposes. You should carefully conduct your own investigations and analyses in connection with any participation in this product, including its objectives, risk factors, fees and expenses and the information set forth in these materials. All prospective participants in the products described herein are advised to consult with their legal, accounting and tax advisers regarding any potential participation. Please read the offering documents carefully before you invest. Additional information is available upon request.
Rates are purely indicative and are subject to change pending availability, approval and market conditions.