The Circle continues to be a masterstroke

Circle, a blockchain company, continues to push forward with its masterstroke. The Circle is the company behind the U.S. Dollar Coin. The company also applied a few weeks ago for a narrow bank charter. This is viewed as nothing less than a backdoor move to become a Central Banking Digital Currency (CBDC).

Because a bank charter would permit the company to keep its cash reserves at Federal Reserve (the Fed) because it is a bank charter, the Federal Reserve, the central bank in the United States, would then back USDC.

However, the Circle's plot has just gotten more complicated

Circle, a consortium that includes digital asset exchange Coinbase announced that USDC's reserve would be converted into cash (United States Dollars) and also short-term United States Treasuries.

This is a significant move. Until now, 39% of USDC’s reserves were made up of a mix of corporate bonds, foreign certificates of deposit (CDs), longer-duration U.S. Treasuries, and foreign certificates of deposits (CDs).

This is the final step in Circle’s masterstroke to make USDC a de facto CBDC. There can be no doubt about USDC's backing. It is 100% cash and short-term U.S. Treasuries. Short-term U.S. Treasuries can be considered cash equivalents.

Now, the Circle must complete the public company process. After that, anyone will be able to access the financial status of the company at any time. This provides complete transparency, which is crucial when it comes time to assess regulatory compliance.

Circle and Coinbase, as we see it, is creating an "easy" button for the U.S. government. They are leaders in blockchain technology and have figured out the technology necessary to create a functional stablecoin, which is 100% backed by United States Dollars.

The government would be able to adopt USDC without having to develop and design its own CBDC. As this process would take a lot of time and with government bureaucracy, this would require all sorts of politics, committees, and red tape, which would, in turn, delay the development considerably - possibly for years.

This would mean that the United States could fall behind China and other countries that are much further along in the development to launch their own CBDCs.

This is a great move. Although there is no guarantee Circle will succeed with this masterstroke, it has placed USDC in a position where the Federal Reserve policymakers and regulators will need to consider adopting USDC as a CBDC.

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