USD1, the stablecoin from Trump-affiliated World Liberty Financial, has issued its first reserve report, and in doing so, revealed that it holds no excess reserves.
The report, which was reviewed by the accounting firm Crowe, provides information about USD1 as of April 30.
Issued by the custodian, BitGo, the report notes that the entirety of the reserves is invested in the Fidelity Investments Money Market Government Portfolio—Institutional Class.
Read more: World Liberty Financial announces USD1 without governance vote
This money market account is made up of US government securities of various types, including treasuries and other agency debts.
USD1 reserves have no safety cushion
Unlike other stablecoins, USD1 doesn’t keep excess assets in its reserves. This means that if this money market fund were to break the buck, then USD1 would have insufficient assets available to back the token.
This is sharply different from other stablecoins; Tether, the largest stablecoin, claims to hold over $5 billion in excess reserves, and Circle, the largest US-domiciled stablecoin, claims to hold approximately $300 million in excess reserves.
These stablecoins hold these reserves to help reduce the risk of any single asset in their reserves becoming inaccessible or losing value, as happened to Circle with the collapse of Silicon Valley Bank, to Tether with the loss of access to funds held at Crypto Capital Corp., to TrueUSD when it invested in a fund that halted redemptions.
USD1 seems to have decided that it doesn’t need to prepare for this type of risk.
