Welcome to USD1float.com

Purpose of this page. This site explains float as it relates to USD1 stablecoins: what the term means, why it appears in day‑to‑day operations, what risks it can introduce, how responsible issuers manage it, and how different rules in the United States, European Union, and United Kingdom shape good practice. The discussion is educational and balanced. It is not legal, accounting, or investment advice.

What is USD1 stablecoins. Throughout this page the phrase USD1 stablecoins means any digital token designed to be redeemable at one for one with U.S. dollars (par value), regardless of issuer or blockchain.

What “float” means for USD1 stablecoins

Working definition. In payments, float (money in transit before final settlement) is the temporary amount of customer funds that have left one step of a process but have not yet fully arrived at the next. In the context of USD1 stablecoins, float is the short‑lived gap that can arise between:

• On‑chain liability (tokens outstanding on a blockchain), and
• Off‑chain reserve assets (cash and cash‑equivalent holdings kept to honor redemptions).

Because token transfers settle on blockchains nearly instantly, while bank and capital‑market rails have their own operating hours and cutoffs, timing differences are normal. Float is not inherently risky, but it must be measured, limited, and controlled.

Plain‑English glossary on first use.

• Clearing (exchanging and validating payment instructions): the message path that makes sure both sides agree on what should happen.
• Settlement (final transfer of funds): the moment value actually moves between institutions.
• T+2 (trade date plus two business days): a time convention meaning an action should complete in two full business days.
• Reverse repurchase agreement or reverse repo (cash invested against high‑quality collateral with an agreement to unwind shortly after): a way to park surplus cash overnight in a secured position.
• Government money market fund (a mutual fund required by rule to hold short‑dated government obligations and cash): often used for operational cash parking.
• High‑quality liquid assets, HQLA (assets that can be turned into cash quickly in stress): a Basel standard used by banks to manage liquidity. ^[4]
• Weighted average maturity, WAM (the time‑weighted average of days until assets mature): a common portfolio risk measure in cash investing. ^[8]

Typical flavors of float

1. Funding‑in float (incoming subscription timing).
   A customer wires U.S. dollars to an on‑ramp that mints USD1 stablecoins. The token may be issued on‑chain after the on‑ramp confirms incoming money, but the wire might still be clearing or be subject to bank cutoff windows. For a short period, reserve cash can be in transit, creating a controlled float that must be reconciled at end of day.

2. Funding‑out float (redemption timing).
   A holder requests to redeem USD1 stablecoins for U.S. dollars. Tokens are burned on‑chain, but the outgoing fiat transfer posts later the same or next business day. Responsible policies define precise timelines. In New York, for example, regulated issuers operating under state supervision have clear expectations for prompt, par‑value redemption; the guidance spells out timelines such as T+2 and requires transparent policies. ^[1]

3. Portfolio settlement float (reserve transactions settling).
   Reserves are typically in cash, Treasury bills, overnight reverse repos, or government money market funds. When an issuer rebalances between these, trades settle in one to two business days, creating predictable but temporary float that must be covered by liquid buffers. ^{[1][3][10][11]}

4. Operational clearing float (bank processing windows).
   Banks do not process twenty‑four hours a day for all flows, especially across weekends and holidays. Even with instant token transfers, an on‑ramp or off‑ramp may need to hold a small operations buffer to bridge those windows.

Why the word “float” matters

Float is a control concept. It is the difference between the liability you owe (tokens outstanding) and the cash or cash‑equivalents you hold (reserves) while money is physically or legally moving. The goal is not zero float at every second; the goal is tight limits, transparent tracking, and sufficient same‑day liquidity to honor redemptions quickly, even during stress.

Why float exists in USD1 stablecoins

Step‑by‑step: from dollars to tokens and back

1. Customer funds U.S. dollars into a trusted account at a supervised bank or a registered money services business.
2. Issuer mints the requested amount of USD1 stablecoins and sends them to the customer’s blockchain address.
3. Issuer invests reserves predominantly in cash and cash‑equivalents that can be liquidated quickly if needed. Leading regulatory frameworks emphasize short‑dated U.S. Treasuries, cash at insured banks, and overnight reverse repos, and they call for monthly third‑party assurance. ^[1][3]
4. Customer redeems by returning tokens; the issuer burns them and sends U.S. dollars back via an outgoing transfer.

At each step, timing differences can appear due to bank cutoffs, security settlement cycles, and compliance checks. Those differences are float.

The practical sources

• Bank cutoffs and holidays. Same‑day wires do not run twenty‑four hours a day, and international transfers can add another day.
• Reserve rebalancing. Moving cash into or out of Treasury bills or government funds involves settlement cycles. ^[10][3]
• Large redemptions under stress. If demand spikes, issuers may need to convert securities to cash quickly. Robust policies are designed precisely for those moments. ^[4][9]

Why not hold only cash?

Cash at banks is liquid but concentrates risk at a few institutions and may offer limited yield to offset operating costs. Short‑dated Treasury bills, overnight reverse repos, and government funds diversify counterparties and add immediate liquidity with conservative interest income. ^[10][11][3] Many well‑known issuers publicly report allocations across these instruments and subject those reports to independent assurance. ^[8][9]

Who gets the interest?

As a rule set by product terms and, in some jurisdictions, by law, holders of USD1 stablecoins are not paid interest on token balances. For example, in the European Union the Markets in Crypto‑assets Regulation (MiCA) expressly prohibits granting interest on e‑money tokens, while guaranteeing redemption at par in funds other than electronic money. ^[2] In the U.S., common practice is that interest earned on reserves funds operations and supports resilience. That design choice makes float management more than a back‑office task; it is part of the safety model.

Regulatory guardrails that constrain float

New York’s stablecoin baseline

The New York Department of Financial Services issued detailed guidance covering redeemability timelines, reserve composition, segregation, and monthly independent attestations. Among other things, the guidance:

• Requires full asset backing with end‑of‑day coverage at or above one for one.
• Requires par‑value redemption with a clear and timely standard such as T+2.
• Limits reserve assets to cash and very safe, short‑dated government instruments and overnight, fully collateralized repos.
• Calls for monthly public assurance reports by an independent U.S. CPA under AICPA attestation standards. ^[1][6]

The European Union under MiCA

MiCA is now in force for e‑money tokens and asset‑referenced tokens. For e‑money tokens referencing the euro or another official currency, MiCA requires at‑par redemption at any time and prohibits interest to token holders. Supervisory powers can escalate for significant issuers. ^[2] Issuers must segregate and prudently invest reserves, with strong disclosure and governance rules. The Central Bank of Ireland and other authorities have outlined applicability timelines and expectations as of mid‑2024. ^[12]

U.S. federal banking context

• OCC interpretive letters clarify that national banks may provide crypto custody, hold dollar deposits serving as stablecoin reserves, and use independent node verification networks and stablecoins for payment activities, subject to safety and soundness. Recent updates removed a prior requirement to obtain formal non‑objection before engaging in these activities, while emphasizing risk management. ^[6][7]
• FDIC guidance warns against misrepresentations: deposit insurance does not cover crypto assets or stablecoins, only insured bank deposits if a bank fails. Cease‑and‑desist actions have targeted misleading claims. ^[5]
• Money market fund rules continue to influence what “cash‑equivalent” means in practice. The SEC’s 2023 reforms adjusted daily and weekly liquidity thresholds and clarified portfolio metrics such as WAM, which issuers and their investment managers watch closely when using government funds as part of reserves. ^[3]
• Liquidity standards such as the Basel Liquidity Coverage Ratio shape how banks that custody or intermediate reserves think about HQLA and stress outflows. ^[4]

Why these guardrails matter for float

Each guardrail reduces the chance that a temporary timing gap could turn into a liquidity crunch. Redemption timelines force issuers to keep a meaningful portion of the reserve in same‑day cash. Asset restrictions push portfolios toward instruments that can be liquidated quickly, even in stressed markets. Monthly third‑party assurance and public disclosures help users verify that outstanding tokens and the reserve are aligned with policy.

Risk taxonomy: how float can go wrong

Float becomes a problem when timing gaps collide with market stress or operational frictions. The examples below are drawn from public cases and regulatory literature; they are presented in generic terms for USD1 stablecoins.

1. Custodian concentration. If a large portion of cash sits at a single bank that experiences turmoil, even temporarily, redemptions can be disrupted until funds are accessible or moved. A 2023 episode showed how concentrated cash exposure at a failed bank can trigger temporary price dislocations and heightened redemptions until authorities and issuers restore confidence and access. ^[13]

2. Portfolio liquidity. Government funds and Treasury bills are highly liquid, but during marketwide stress, settlement can slow and bid‑ask spreads can widen. Rule changes and supervisory expectations since 2020 have aimed to improve resilience in these funds. ^[3]

3. Settlement pipelines. Outgoing wires and international transfers face cutoffs. If a redemption wave peaks after cutoffs, issuers need sufficient prepositioned cash to meet their own timing promises such as T+2. ^[1]

4. Communication gaps. If policies are unclear about what “timely” means, or if status updates are sparse during an incident, rumors can amplify redemptions. Clear, frequent updates help manage expectations.

5. Operational errors. Mistyped instructions, compliance holds, or misrouted wires can create outliers. Good reconciliation and exception handling minimize impact.

6. Run dynamics. If users believe the reserve is not immediately accessible or not fully conservative, redemptions can become self‑reinforcing. Academic and central bank research has compared these dynamics to stress in cash‑like funds. ^[14]

Key insight: None of these risks require exotic crypto knowledge. They are the same liquidity, settlement, and governance questions that decades of payments and cash‑management practice have addressed. What is new is the speed of on‑chain liabilities relative to the business‑day cadence of traditional cash rails.

Measuring float in practice

You cannot manage what you do not measure. Responsible issuers of USD1 stablecoins track a handful of practical gauges every business day:

• Outstanding tokens vs. reserves at end of day. This is the core reconciliation: outstanding liabilities must be covered by reserves of equal or greater market value, with documented reconciling items such as funds in transit. ^[1]

• Same‑day liquidity coverage. How many tokens could be redeemed for U.S. dollars today without selling a single security? Conservative practice aims for a sizable share of reserves in cash and overnight instruments that convert to cash before cutoffs.

• Liquidity ladder by time bucket. What portion of reserves becomes cash in one day, three days, one week, and two weeks under normal settlement cycles? A simple ladder exposes timing mismatches and keeps float inside limits.

• WAM of reserves. A shorter WAM reduces interest‑rate volatility and speeds conversion to cash, though it may modestly reduce yield. Portfolio rules for government funds and Treasury holdings often specify maximum WAMs; investment managers report these metrics publicly. ^[3][10]

• Custodian diversification. How much cash sits at each bank or clearing counterparty? Regimes like the New York guidance expect percentage caps to limit concentration. ^[1]

• Stress testing. What if redemptions triple on a Friday afternoon before a long weekend? What if an international payments corridor is closed for a holiday? These scenario drills turn abstract “float” into concrete buffers and playbooks.

A plain‑English formula for average float. Pick a period such as a calendar month. Sum the dollars “in transit” each day between on‑chain liability and off‑chain cash posted to the reserve accounts. Divide by the number of days in the period. The result is your average operational float for that month. The target should be low, bounded, and explainable.

Operational controls that keep float safe

1. Daily reconciliation with dual control. Match blockchains’ token supply to reserve statements and trade tickets every business day, with two‑person approval. Publish aggregate figures on a regular cadence.

2. Same‑day cash buffers. Hold enough immediately available cash to meet expected and stressed redemption volumes before bank cutoffs, without selling securities. Maintain procedures for same‑day or next‑day liquidation of short‑dated Treasuries and reverse repos. ^[10][11]

3. Multiple banks and counterparties. Spread operational cash across several FDIC‑insured institutions and several repo counterparties to reduce concentration risk, consistent with the New York guidance. ^[1][5]

4. Tight reserve policy. Limit holdings to cash, Treasury bills, overnight reverse repos against U.S. government collateral, and government funds that themselves hold only those instruments and cash. Keep WAM short. ^[1][3][10]

5. Clear redemption service level. State what “timely” means, when the clock starts, which cutoffs apply, and how updates will be communicated during incidents. New York provides specific language that issuers can adopt. ^[1]

6. Independent assurance. Obtain monthly CPA attestations under AICPA attestation standards or ISAE 3000, and publish them. Reserve transparency pages from large issuers provide examples of the disclosures users find helpful. ^{[6][8][9][15]}

7. Crisis playbooks. Pre‑authorizations to move cash, standing reverse repos, phone trees for counterparties, and templates for customer updates reduce reaction time when stress hits.

8. Board‑level oversight. The reserve policy, redemption policy, and disclosures should be approved at the top of the organization, with periodic reviews based on changes in regulation and market structure.

Transparency: attestations, audits, and proofs

Attestations vs. audits, in plain English. An attestation is an independent accountant’s opinion on management’s assertions using recognized attestation standards. In the U.S., CPAs use the AICPA Statements on Standards for Attestation Engagements; internationally, firms may use ISAE 3000 for assurance engagements other than financial statement audits. ^[6][15]

• What monthly attestations typically cover. Whether reserves were at least equal to tokens outstanding at specified dates, what instruments were held and in what amounts, and whether reserve policy constraints were met. New York’s guidance requires monthly examinations and public reports. ^[1]

• Why not continuous audits. Bank statements, repo confirmations, and fund holdings are snapshots tied to business‑day cycles. Frequent public data, plus monthly professional assurance, strikes a workable balance between cost and transparency.

Proof‑of‑reserves and on‑chain signals. Some organizations publish on‑chain addresses for reserve assets that can be represented on public ledgers. That approach can add transparency for certain instruments but does not replace fiat bank statements or repo contract confirmation. In practice, users benefit most from regular, plain‑English disclosures and independent assurance aligned to recognized standards. ^{[8][9][6][15]}

Global context: U.S., EU, and U.K. notes

• United States. State supervision, federal bank oversight, and securities rules indirectly shape how USD1 stablecoins operate. The OCC’s letters outline what is permissible for national banks regarding stablecoin reserves and payment activities, with recent steps emphasizing risk management rather than prior approvals. FDIC communications remind the market that deposit insurance is for insured deposits when a bank fails, not for stablecoins or other non‑deposit products. ^[6][7][5]

• European Union. MiCA now applies to e‑money tokens and asset‑referenced tokens, with clear par‑value redemption and a ban on paying interest to token holders. National authorities coordinate with the EBA for significant issuers. ^[2][12]

• United Kingdom. Authorities have consulted on bringing fiat‑referencing stablecoins into the regulatory perimeter for payments, with the Bank of England focused on systemic payment systems and the FCA focused on conduct requirements. The policy path is evolving. ^{[16][17][18][19]}

Convergence theme. Across regions, supervisors converge on three simple ideas: par‑value redemption, conservative reserves, and clear disclosures. All three directly reduce float risk.

Frequently asked questions

Does float mean the issuer is under‑collateralized?
No. Properly managed float simply reflects the timing of payments and settlements. Robust policies require that reserves equal or exceed outstanding tokens at end of day, with any in‑transit items documented and reconciled. ^[1]

Are USD1 stablecoins insured by the FDIC?
No. FDIC insurance protects insured bank deposits if an insured bank fails. It does not insure stablecoins or other crypto assets. Regulators have issued advisories and enforcement actions against misleading claims. ^[5]

Why do issuers invest in Treasury bills or overnight reverse repos?
Short‑dated Treasuries and overnight reverse repos are among the most liquid, conservative dollar instruments available, and they can be converted to cash quickly during stress. They also earn conservative interest that helps cover operations and resilience. ^[10][11]

What happens in a stress event?
Responsible issuers hold large same‑day cash buffers, liquidate overnight repos, and, if needed, sell short‑dated Treasuries to meet redemptions. Clear communications and timely wires restore confidence. Public episodes in 2023 highlighted the importance of diversified custodians and rapid access to reserves. ^[13]

How do money market fund rules matter here?
When issuers use government money market funds for a slice of reserves, those funds themselves must meet strict liquidity and maturity requirements. The SEC’s 2023 reforms increased minimum liquidity and refined portfolio metrics, improving resilience. ^[3]

Is paying interest to token holders allowed?
In the EU, MiCA prohibits granting interest on e‑money tokens. Other jurisdictions vary, but paying interest can change how a product is regulated. Always check local rules. ^[2]

Can banks hold reserves for USD1 stablecoins?
Yes, under U.S. national bank authority and subject to safety and soundness, banks may hold dollar deposits that serve as stablecoin reserves. Recent OCC actions emphasize risk management without requiring pre‑approval. ^[6][7]

What is the relationship between float and HQLA?
Float is operational; HQLA is about asset quality under stress. Keeping reserves in HQLA‑type instruments helps ensure that float can be bridged quickly, even on bad days. ^[4]

What disclosures should a user look for?
Monthly independent attestations, a clear reserve policy, daily or weekly circulation and reserve figures, custodian diversification, and a precise redemption service level. Transparency pages from large issuers illustrate good practice. ^[8][9]

Sources

^[1] New York Department of Financial Services, Guidance on the Issuance of U.S. Dollar‑Backed Stablecoins (June 8, 2022). https://www.dfs.ny.gov/industry_guidance/industry_letters/il20220608_issuance_stablecoins

^[2] European Union, Regulation (EU) 2023/1114 on markets in crypto‑assets (MiCA), including Article 50 Prohibition of granting interest and Article 49 Redemption at par. Official Journal L 150, June 9, 2023. PDF: https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32023R1114

^[3] U.S. Securities and Exchange Commission, Final Rule: Money Market Fund Reforms; Form PF (Release No. 33‑11211, July 12, 2023). PDF: https://www.sec.gov/files/rules/final/2023/33-11211.pdf

^[4] Basel Committee on Banking Supervision, Basel III: The Liquidity Coverage Ratio and liquidity risk monitoring tools (January 2013). PDF: https://www.bis.org/publ/bcbs238.pdf

^[5] Federal Deposit Insurance Corporation, Advisory to FDIC‑Insured Institutions Regarding Deposit Insurance and Dealing with Crypto‑Asset Companies (FIL‑35‑2022, July 29, 2022). https://www.fdic.gov/news/financial-institution-letters/2022/fil22035.html

^[6] Office of the Comptroller of the Currency, Interpretive Letter 1174: Authority to use independent node verification networks and stablecoins for payment activities (January 4, 2021). PDF: https://www.occ.gov/news-issuances/news-releases/2021/nr-occ-2021-2a.pdf

^[7] OCC Bulletin 2025‑2 and related communications (March 7, 2025) clarifying that banks may engage in activities described in prior letters, including holding dollar deposits as stablecoin reserves, subject to safety and soundness. https://occ.gov/news-issuances/bulletins/2025/bulletin-2025-2.html

^[8] Circle, Transparency & Stability page for weekly reserve disclosures and monthly third‑party assurance. https://www.circle.com/transparency

^[9] Tether, Transparency page for circulation and reserves information. https://tether.to/transparency/

^[10] U.S. Treasury, Treasury Bills overview (TreasuryDirect). https://treasurydirect.gov/marketable-securities/treasury-bills/

^[11] Board of Governors of the Federal Reserve System, The dynamics of the U.S. overnight triparty repo market (FEDS Notes, August 2, 2021). https://www.federalreserve.gov/econres/notes/feds-notes/the-dynamics-of-the-us-overnight-triparty-repo-market-20210802.html

^[12] Central Bank of Ireland, Markets in Crypto‑Assets Regulation (MiCAR) timeline and scope. https://www.centralbank.ie/regulation/markets-in-crypto-assets-regulation

^[13] Reuters, Major crypto coins stabilise after U.S. intervenes on SVB; USDC remains redeemable (March 13, 2023). https://www.reuters.com/technology/bitcoin-usdc-stablecoin-rally-after-us-intervenes-svb-2023-03-13/

^[14] Federal Reserve Bank of New York, Are Stablecoins the New Money Market Funds? (Staff Report No. 1073, updated 2023). PDF: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1073.pdf

^[15] IAASB, ISAE 3000 (Revised), Assurance Engagements Other than Audits or Reviews of Historical Financial Information. https://www.iaasb.org/publications/international-standard-assurance-engagements-isae-3000-revised-assurance-engagements-other-audits-or