On Wednesday, the New York Federal Reserve (NY Fed) restricted counterparty standards for its reverse repurchase program (RRP), a move that could prevent stablecoin issuer Circle from obtaining Fed loans.

According to a press release from the Federal Reserve Bank of New York, funds "organized for a single beneficial owner" registered with the U.S. SEC as "2a-7 funds" "generally will be deemed non-compliant with the new rules." The Circle Reserve Fund appears to fall into this category. It is reported that Circle has placed approximately $25 billion in short-term U.S. Treasury reserves in the Circle Reserve Fund, a customized fund managed by BlackRock. According to Circle's earlier press releases and documents submitted to the SEC regarding the fund, the Circle Reserve Fund is for Circle's use only and is registered as a "2a-7" government money market fund.

The RRP allows selected counterparties (such as money market funds, banks) to provide overnight loans to the Federal Reserve at a fixed interest rate (currently 4.8%). Although the tool was originally created as a stabilization tool for the financial system, it has become an attractive tool to earn high returns with minimal counterparty risk. Currently, the program's funding reaches nearly $2.3 trillion. (CoinDesk)