Another pitch is going to make an appearance from the Cryptoverse for corporate treasures who are fed up of the low returns they are making on their cash. One of the digital asset companies behind the renowned stablecoin USDC pegged to the dollar 1-on-1, Circle Internet Financial Ltd. has come up with an alternative. This is aimed at the legions who are too conservatives to opt for Bitcoin similar to Jack Dorsey and Elon Musk. You can invest your extra cash in USDC and will be able to make 7% returns annually via high-yield accounts. This is approximately 10 times what you make in a year on an ultra-safe Treasury bill.
Some treasurers may certainly find the idea appealing, especially if they were seduced by the big benefits in crypto but had to see the almost 40% decline in its value by mid-April. The attention has now shifted towards stablecoins like USDC due to their ability to maintain their pegs during the wild price swings in the crypto market. Even so, not all observers of the digital market are convinced. If companies want to invest their corporate reserves in a fully audited stablecoin, it will be quite similar to how they deposit their money in a bank account. However, if the yields are higher than that of a bank account, then the investment is not in just any risk-free asset.
As far as Circle’s program is concerned, treasurers would have to open a ‘digital dollar account’, where the fiat money of the company will be converted into USDC and interest will also be paid in the form of the stablecoin. These digital dollars will be lent by Circle to a network of institutional investors who are ready to pay an interest rate for getting access to additional capital, thereby allowing yield to be generated. Upon opening the account, the companies will lock in their return, just like a bank certificate of deposit. The circle is planning to offer accounts having different maturities, ranging from a month to a year, and no early withdrawals will be permitted.
The available rates will be updated on a weekly basis, depending on the demand for loans. This strategy is a bit tamer than the one that had been highlighted by Michael Saylor, the chief executive for MicroStrategy Inc. He had advocated that all reserves should be poured into Bitcoin because surging inflation was eroding the value of the dollar. The announcement by Elon Musk in February about adding Bitcoin to Tesla Inc.’s balance sheet had also fueled the rally that pushed the pioneer cryptocurrency to a new all-time high in April.
However, the cryptocurrency lost more than one-third of its value. With some companies following Tesla, Square Inc. and MicroStrategy into Bitcoin, Circle is hoping that stablecoins will be the next practical step. The company is working with one of the biggest crypto lenders, Genesis Global Capital. They will first introduce the service in the United States and Switzerland and is scheduled for an ‘imminent launch.