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Bloomberg

Bitcoin’s volatility creates a new alternative to the crypto balance sheet

(Bloomberg) – Corporate treasurers who are fed up with the lowest returns on their cash are about to get another argument from the crypto world. Circle Internet Financial Ltd., one of the companies of digital assets behind the so-called stablecoin dubbed USDC which is pegged 1 to 1 to the dollar, has concocted an alternative for legions too conservative to follow the likes of Elon Musk and Jack Dorsey in Bitcoin. Put your extra money in USDC and earn up to 7% a year through high-yield accounts, according to marketing – more than 10 times the yield on a super-safe one-year treasury bill. who were initially won over by crypto’s big gains, especially after Bitcoin’s drop of around 40% since mid-April. Stable coins such as the USDC are gaining more and more attention due to their ability to hold their pegs during wild swings in cryptocurrency prices, suggesting that they could in fact serve as a store of value. . Even so, not all long-term digital market watchers are convinced. “If companies want to put their corporate reserves in a stable currency and this is fully audited, it’s like putting their money in a bank account, which they normally do.” John Griffin, professor of finance at the University of Texas at Austin, said in an email. “However, if the account generates a higher return than the bank account, it is not simply invested in a risk-free asset.” Here’s how Circle’s program will work: Treasurers would open a “digital dollar account” where the company’s fiat currency is converted to USDC and interest is paid in USDC. The return is generated by Circle lending the digital dollars to a network of institutional investors who are willing to pay an interest rate to access additional capital Companies lock in their return when the account is opened, such as a certificate of deposit banking. . Circle plans to offer accounts with maturities ranging from one month to one year, with no early withdrawals allowed. The available rates will be updated weekly, based on USDC loan demand, which is a bit more tame than the strategy first put forward last year by MicroStrategy Inc. CEO Michael Saylor. , who advocated pouring the company’s reserves into Bitcoin because he said the dollar. is degraded by soaring inflation. Musk’s announcement in February that Tesla Inc. had added Bitcoin to its balance sheet helped fuel the rally that took the largest cryptocurrency to a record high in April before it lost more than a third of his value. go to Vegas, or something more volatile and rigged against you like Bitcoin, ”Griffin said. The company is working with Genesis Global Capital, one of the largest crypto lenders. The service will first be made available in the United States and Switzerland, and will launch “shortly,” said Jeremy Allaire, CEO of Circle. , in an interview. Thousands of businesses are already on the waiting list, according to Circle. “We see the opportunity for the cash use case grow a lot,” Allaire said. Other stablecoin providers are rolling out similar offers. On May 26, the Gemini exchange – the brainchild of the Winklevoss brothers – said investors could earn up to 7.4% per year on Gemini dollars through a program called Gemini Earn. The Gemini token is also pegged to the dollar and its reserves are held with State Street Bank and Trust, the world’s largest financial custodian. Each month, the dollar deposit balance is reviewed by BPM LLP, an independent registered accounting firm. USDC reserves are verified monthly by the accounting firm Grant Thornton LLP and published online. Various small crypto lenders offer already have yield accounts for different coins, including less For these products, “the appropriate users would be people who invest in bad bonds or similar risky loans,” said Aaron Brown, a crypto investor and writer for Bloomberg Opinion. “It could offer a better risk-adjusted return than the alternatives. . . or not. But anyway, it’s not a savings account as most people understand it. More articles like this are available at bloomberg.com Subscribe now to stay ahead with the most trusted source of business news. © 2021 Bloomberg LP


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