Circle Internet Financial has announced a significant deepening of its partnership with BlackRock, the world’s largest asset manager, by transferring USDC stablecoin reserves into a BlackRock-managed fund registered with the U.S. Securities and Exchange Commission (SEC). The move, disclosed on November 3, 2022, is designed to bolster the transparency and security of reserves backing the second-largest stablecoin by market capitalization.
A $400 Million Investment Paves the Way
In mid-April 2022, Circle revealed it had closed a $400 million funding round led by BlackRock, along with Fin Capital, Fidelity Management and Research, and Marshall Wace LLP. At that time, BlackRock indicated it would take on a role managing a portion of the reserves that back USDC. Six months later, Circle CFO Jeremy Fox-Green confirmed the transition had begun: “Through our partnership with BlackRock, we have begun investing in the Circle Reserve Fund to manage a portion of the USDC reserves.” He added that the reserve composition is expected to remain approximately 20% cash and 80% short-duration U.S. Treasuries. The Circle Reserve Fund (ticker: USDXX) seeks current income consistent with liquidity and principal stability. As the sole investor, the fund allocates at least 99.5% of total assets to cash, U.S. Treasury bills, notes, and other government obligations. Circle aims to complete the full transition by the end of March 2023. The fund is held by Bank of New York Mellon, which had already been acting as custodian for USDC’s U.S. Treasury reserves.
Market Headwinds: USDC Circulation Slips, EURC Eyes Solana
Despite this positive news, the circulating supply of USDC has declined markedly over the past few months. Industry observers attribute the drop to increased competition from Tether’s USDT and the broader crypto bear market. Separately, Circle launched a euro-backed stablecoin, Euro Coin (EURC), in June 2022. At a recent Solana-focused conference, Circle’s Director of Engineering Marcus Boorstin announced that EURC will be minted natively on the Solana blockchain next year. This expansion leverages Solana’s high throughput and low transaction costs, potentially opening up new use cases in decentralized finance (DeFi) and cross-border payments. The partnership with BlackRock and the upcoming Solana integration signal Circle’s strategy to strengthen its stablecoin infrastructure amid regulatory scrutiny and shifting market dynamics. However, reversing the downward trend in USDC’s market share remains a key challenge.