Circle's Float Problem

Stablecoins are a pretty easy concept to wrap your head around: you give the stablecoin issuer a dollar, they invest that dollar into some specified mix of “safe” assets, and in return they give you a digital token. That digital token has some magical properties that I won’t get into today, but they theoretically enable use cases that you aren’t able to achieve on traditional monetary rails. There have been many people who have noted this is kind of similar to what banks do, with one key difference: the stablecoin issuer doesn’t return that interest back to you, but instead pockets it for itself. This has led Tether, issuer of USDT, to become one of the most profitable companies per employee. Circle follows the same pattern, issuing its USDC dollar stablecoin, managing its reserve in cash and US Treasuries, and earning profits via the yields on its reserve. Circle partnered with Coinbase as a key distribution partner, reportedly entering a revenue sharing agreement. This setup is…