ProShares’ ETF prepared for stablecoins launches with $17 billion, raising questions regarding Circle.

Analysts have suggested that a significant issuer such as Circle may be transferring reserve assets in bulk into the ETF, but available data indicates otherwise.

(Ryan Quintal/Unsplash, Modified by CoinDesk)

Key points:

• ProShares introduced IQMM, a money market ETF designed to adhere to U.S. stablecoin reserve regulations under the GENIUS Act.
• The fund recorded more than $17 billion in trading during its initial day, leading to speculation about large stablecoin issuers like Circle transferring assets.
• However, data implies that the trading volume is likely due to internal fund movements rather than Circle’s actions.
• Nonetheless, the IQMM could attract interest from the $300 billion stablecoin market as the sector faces increasing regulation, according to 10x Research’s Markus Thielen.

ProShares’ newly launched ETF tailored for the expanding $300 billion stablecoin market experienced a significant debut, igniting speculation regarding the involvement of a prominent stablecoin issuer.

The fund, named the ProShares GENIUS Money Market ETF (IQMM), is structured to hold short-term U.S. Treasuries and comply with the reserve stipulations outlined in the GENIUS Act, a federal regulation governing stablecoin issuers in the U.S. This ETF is the first specifically designed to align with those regulations, potentially attracting the attention of major players in the cryptocurrency space.

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The ETF achieved a remarkable $17 billion in trading volume on its inaugural day, indicating that substantial players were investing in the fund. For comparison, BlackRock’s spot bitcoin ETF — one of the most awaited launches in recent times— recorded $1 billion in volume on its first day.

Is Circle transferring assets or is it an internal adjustment?

The significant trading volume has prompted analysts to consider the origins of the inflows.

Nate Geraci, president of The ETF Store, remarked in a post on X that the strong inflows might hint at an agreement with a major stablecoin issuer based in the U.S. “Analyzing the assets, it appears that Circle would be the only option,” he stated, referring to the entity behind the $74 billion USDC token.

However, Circle’s primary reserve fund for USDC, managed by BlackRock, has not reported any significant alterations thus far. It held nearly $64 billion in assets as of Friday, an increase from $59 billion at the end of January, according to data.

It is more plausible that the initial volume was generated from ProShares’ own funds reallocating assets for cash management reasons.

Ben Johnson, head of client solutions for asset management at Morningstar, observed that one of ProShares’ leveraged ETFs, QTTT, transferred $6 billion into IQMM on the day of its launch. Such an internal reallocation could clarify a substantial part of the day-one trading activity.

Framework for stablecoin reserves

Nevertheless, there is a genuine possibility of demand from stablecoin issuers. With over $300 billion in U.S. dollar stablecoins in circulation, a considerable portion of those reserves could eventually be directed toward ETFs like IQMM.

Markus Thielen, founder of 10x Research, noted in a report released on Friday that IQMM is “currently the only tool designed specifically” to meet the GENIUS Act regulations while offering rapid liquidity.

This could position it as a preferred option for U.S.-based issuers such as Circle, Paxos, and BitGo — as well as for banks aiming to launch their own tokenized deposits under the new legislation. Tether, which operates the largest stablecoin globally with the $184 billion USDT token, has also introduced a stablecoin in partnership with federal bank Anchorage Digital in the U.S. market.

As regulatory oversight increases and new tokens are introduced, tens of billions in additional assets could eventually be funneled into funds like IQMM, Thielen stated.