The volatility of Bitcoin creates a new alternative to the cryptocurrency balance.
This is for corporate treasurers who are tired of the minimum return on their money before receiving another income option from the crypto market.
Circle Internet Financial Ltd., the digital asset company behind the so-called stablecoin, dubbed USDC, pegged to the dollar 1 to 1, has prepared an alternative for the overly conservative legions. Marketers said that with this alternative, one can store his cash in US dollars and earn up to 7% per year in high-yield accounts, which is more than 10 times the income from an ultra-reliable annual treasury bill.
The idea may be appealing to some treasurers who were initially tempted by the cryptocurrency's big rise, especially after Bitcoin has fallen about 40% since mid-April. Stablecoins such as the USDC are attracting more and more attention because of their stability during a period of wild fluctuations in cryptocurrency prices, which suggests that they can really serve as a means of saving. Even so, not all long-term investors in the digital market are sure of this.
John Griffin, Finance Professor at the University of Texas at Austin, says investing in Stablecoins is equivalent to just a bank account. However, when the return on the set is paid higher, it means that it is no longer just an investment in some risk-free asset.
The principle of the Circle program is as follows: a digital account is opened in a digital dollar, where the company's fiat money is converted into USDC, and interest is paid in USDC. The return is generated by lending to a network of institutional investors who are willing to pay an interest rate for access to additional capital.
Circle plans to offer accounts with a maturity of one month to a year, without the possibility of early withdrawals. The available rates will be updated weekly depending on the demand for USDC loans.
This strategy is slightly simpler than the one proposed last year by Michael Sailor, CEO of MicroStrategy Inc, who agitated for the infusion of the company's reserves into Bitcoin due to the depreciation of the US dollar amid inflation. On the other hand, Musk's announcement last February that Tesla Inc. added Bitcoin to its balance sheet, contributed to the growth. As a result of which the largest cryptocurrency exploded the Internet with its growth, and then collapsed with the same success.
Due to the fact that many companies in relation to bitcoin take the example of Tesla, MicroStrategy, Dorsey's Square Inc., Circle hopes that Stablecoins can become the next popular option as an alternative. The company is working with Genesis Global Capital, one of the largest crypto lenders.
Jeremy Allaire, CEO of Circle, stated that the service will soon be launched and available in Switzerland and the United States. There are thousands of businesses already on the waiting list.
Other stablecoin providers are issuing similar offers. Gemini, the brainchild of the Winklevoss brothers, announced on May 26 that investors can earn up to 7.4% per annum on Gemini dollars through a program called Gemini Earn. The Gemini token is also pegged to the US dollar, and its reserves are held by the State Street Bank and Trust, the largest financial custodian in the world. The dollar deposit balance is reviewed each month by an independent registered accounting firm BPM LLP.
The USDC reserves are confirmed monthly by the accounting firm Grant Thornton LLP and published online.
At the same time, various small crypto lenders already offer yield accounts for different coins, including less regulated Stablecoins like Tether.
People who invest in bonds, such a product as stablecoin will be more profitable.