After the staggering collapse of Silicon Valley Bank on Friday, questions swirled around the exposure of one of the leading crypto firms, Circle, the issuer of the second-largest stablecoin, USDC.
In its March attestation, Circle had revealed that portion of its $9.88 billion in cash reserves was held by SVB, although it did not disclose the total amount. Following SVB’s collapse, USDC withdrawals surged, with crypto intelligence platform Nansen showing more than $1 billion in redemptions of the stablecoin since SVB shut down. USDC has a market capitalization just north of $40 billion.
As USDC lost its $1 peg on various crypto exchanges amid pullbacks, Circle sought to build trust, with the company tweeting at 6:50 p.m. ET that it would continue to operate as normal, sharing that SVB was the one of the six banking partners it uses for the 25% of its reserves which it keeps in cash, without however disclosing the amount held at the SVB.
Silicon Valley Bank is one of six banking partners that Circle uses to manage the approximately 25% share of USDC’s reserves held in cash. While we await clarification on the impact of SVB’s FDIC receivership on its depositors, Circle and USDC continue to operate as normal.https://t.co/NU82jnajjY
— Circle (@circle) March 10, 2023
As investors continued to exit USDC, Binance announcement he would temporarily suspend his automatic conversion policy from USDC to its stablecoin BUSD, citing “market conditions” and describing the action as a “normal procedural step in risk management.”
At 10:11 p.m. ET, Circle offered more clarity, tweeting that $3.3 billion – or about 8% – of its reserves remained at SVB, revealing that transfers initiated Thursday to withdraw balances from the bank had not not been treated.
Dante Disparte, Circle’s chief strategy officer, tweeted shortly after that Circle was protecting USDC “from a black swan failure in the banking system.”
@circle currently protects #USDC of a black swan failure in the American banking system. @SVB_Financial is a critical bank in the US economy and its failure – without a federal bailout – will have broader implications for businesses, banks and entrepreneurs. https://t.co/CYi6Z26ngH
— Dante Disparte (@ddisparte) March 11, 2023
Meanwhile, the USDC peg continued to weaken, the token trade at $0.92 against tether on Kraken starting at 10:40 p.m. ET. Coinbase announcement it would temporarily suspend USDC-to-USD conversions over the weekend while banks are closed, adding that during times of increased activity, conversions depend on banks’ USD transfers clearing during normal banking hours. bank. Coinbase work with Circle to create USDC, launching the token in 2018.
After the FDIC placed SVB in receivership on Friday, the weekend will prove an uncertain time as the financial world waits to see if the US government is able to find a buyer for the bankrupt bank or if it will. to cover losses, the insured deposits being only safeguarded. at $250,000. Former Treasury Secretary Lawrence Summers called for depositors to be fully reimbursed.
While the crypto industry seems to be safe of the SVB contagion for now, with much of the sector moving towards Signature Bank and other partners following Wednesday’s events voluntary liquidation of Silvergate, Circle might be an exception. The company is a fundamental cog in the crypto ecosystem, with USDC serving as a crucial on-ramp to crypto for investors around the world.
Some viewers expressed confidence that Circle would be able to weather the storm. Investor Adam Cochran tweeted this circle could cover a possible difference of 3.3 billion dollars thanks to the interest it collects on the reserves, a share of sale or other debts at risk.
“It’s not a problem in my mind,” he wrote.
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