Volatility Paves Way for USDC Presence on Balance Sheets

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In Brief
  • Circle proposes corporate treasures invest spare cash in USDC for annual returns of up to 7%.

  • Returns stated to be more than 10 times higher than those expected from a 1-Year Treasury Bill.

  • USDC currently ranks 8th most valuable cryptocurrency by market capitalization.

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The volatile nature of crypto market front-runners like bitcoin (BTC) could lead to their replacement on company balance sheets.

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As price swings lead to low returns for corporate treasurers, they look for an alternative. An alternative in the form of the stablecoin USD Coin (USDC). According to Bloomberg, Circle Internet Financial Ltd., one of the chief developers of USDC, has proposed an alternative for corporations looking to have a hand in the crypto space but are reluctant to go down the precarious BTC avenue. 

The proposal asserts that firms can invest their savings in USDC, and earn up to 7% interest per year when placed in a high-yield account. Reports indicate that this figure equates to over ten times the return expected from a one year Treasury Bill.

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More specifically, corporate treasurers will open a special account in which fiat money gets converted to USDC. The subsequent interest is therefore paid out in USDC. Meanwhile, Circle lends the funds to a network of investors willing to pay an interest rate, which in turn generates the yield.

The appeal of stablecoins

Stablecoins like USDC have their value tied to that of another reference. Such as, in USDC’s case, the US Dollar, with which it is pegged 1-to-1. With this in mind, they are not as prone to price swings, nor as vulnerable to crashes or suffering from market corrections, as other cryptocurrencies.

During the recent crypto price collapse on May 19, BTC’s price swept down to a record low of $30,000 from an already-low point of $43,000. USDC, on the other hand, only suffered minor fluctuation. As did its rival in the rankings, fellow stablecoin Tether (USDT).

Both tokens hit milestones in the days following the price crash, with USDT surpassing its $60 billion market cap mark. USDC, meanwhile, made it into the top 10 biggest cryptocurrencies by market cap. It ranked 10th on May 24, and has only continued to climb since. At time of press, data indicates it now ranks 8th, with a market cap of over $22 billion.

Circle makes history

It has been a positive week for Circle this week. On May 29, reports revealed they had secured an investment round of $440 million. The largest investment in crypto history, as reported by Forbes. This multimillion deal smashed Bitmain’s record, which had been held since 2018 when they acquired $422 million in their Series B1 round.

Circle’s CEO Jeremy Allaire gushed about the investment in a thread of tweets, shared on May 28. 

“We are thrilled and humbled by the support and partnership with these great investors, and excited to keep building a lasting institution that we believe can help transform the global financial system on the foundation of the open internet.”

He also revealed the financing would be used “to accelerate our growth and market expansion.

“This comes on the heels of extraordinary growth in USDC adoption, and acceleration across our business.”

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Dale Hurst is a journalist, presenter, and novelist. Before joining the Be In Crypto team, he was an editor and senior journalist at a news, lifestyle and human-interest magazine in the UK. Cryptocurrency was one of the first subjects he specialized in when first going freelance in 2018, reviewing exchanges and analysing lawsuits.

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