USD Coin (USDC) lost its 1:1 peg to the USD after stablecoin issuer Circle revealed that the firm has a $3.3B exposure to the failed Silicon Valley Bank.
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.
— Circle (@circle) March 11, 2023
Hours after Silicon Valley Bank’s collapse, Circle tweeted that SVB, alongside five other banks, was responsible for managing 25% of USDC’s reserves.
Circle also confirmed that it was unable to withdraw $3.3B worth of funds stuck on Silicon Valley Bank. These funds amount to 8% of Circle’s $42B reserves, making it one of the worst-hit crypto firms in the aftermath of SVB’s bank run.
@circle is currently protecting #USDC from a black swan failure in the U.S. banking system. @SVB_Financial is a critical bank in the U.S. economy and its failure - without a Federal rescue plan - will have broader implications for business, banking and entrepreneurs. https://t.co/CYi6Z26ngH
— Dante Disparte (@ddisparte) March 11, 2023
Meanwhile, Circle’s chief strategy officer Dante Disparte reassured the community by claiming that Circle is protecting USDC from a “black swan failure.” Disparte said a majority of USDC reserves remain in Circle Reserve Fund, where 80% of the funds are held in short-term US treasuries while the remaining are spread across other banks. In his words,
“As with Silvergate, our teams have worked at speed to limit any exposure to banks. This includes a wire transfer request made before SVB's FDIC receivership.”
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Circle’s announcement has caused a major selloff of USDC, causing the token’s price to sink by 10% within hours. The token has yet to regain its peg with USD, with the stablecoin currently valued at $0.9126.
It is worth noting that Circle's rival Tether (USDT), has remained unaffected by SVB's collapse. As per a recent tweet by Tether's CTO Paolo Ardoino, the firm behind the largest stablecoin boasts zero exposure to Silicon Valley Bank.
Written by
Ayush Pande
Ayush Pande is a hardware, gaming, and crypto writer based in India. He's a tech enthusiast who's fascinated by the potential of blockchain technology.
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