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Cash Flows From Stablecoins To Treasuries, CEO Says

According to Circle Internet CEO Jeremy Allaire, stablecoin investments are flowing into assets such as US Treasuries in response to prevailing macroeconomic conditions.

According to Jeremy Allaire, Chief Executive Officer of Circle Internet Financial Ltd., stablecoin investments are flowing into assets such as US Treasuries in response to prevailing macroeconomic conditions.

Rising interest rates have caused institutions to rethink how much exposure they want to cryptocurrencies and instead buy lower-risk assets such as US Treasuries or money market instruments, Allaire said in an interview on Friday.

“This is just a macro phenomenon,” said Allaire, whose company runs the USD Coin stablecoin, on the sidelines of the Singapore FinTech Festival. “We can’t really control that.”

The market cap of USD Coin, also known as USDC, has fallen from a recent high of about $56 billion to just over $42 billion, data from CoinGecko shows. Circle says the token — the second-largest stablecoin and fifth-largest cryptocurrency — is fully backed by cash and short-dated US Treasury bonds.

Stablecoins, which typically promise a constant value of $1, skyrocketed on the regulatory agenda this year following the destruction of $60 billion in its algorithmic variant TerraUSD and its sister token Luna. The implosion exacerbated the defeat of this year’s digital assets and sparked explosions at a range of crypto outfits.

“We were extremely skeptical about projects in algorithmic stablecoins,” Allaire said. “It’s kind of what I like to call financial alchemy.”

TerraUSD was intended to have a constant value of $1 through a complex mix of algorithms and merchant incentives involving Luna. The building collapsed as trust in the ecosystem evaporated.

Circle’s plan to merge with acquisition company Concord Acquisition Corp. for special purposes has been delayed. Allaire said he is optimistic Circle could become a publicly traded company in the “near future.”

Circle said earlier this week that it received a license from the Monetary Authority of Singapore to provide digital token payment services. It had previously designated Singapore as its main hub in Asia.

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