USDC issuer Circle has pledged to cover any shortfall in the stablecoin’s reserves if it does not receive the entirety of the $3.3 billion held at the now-collapsed Silicon Valley bank.
In Saturday’s blog post, Circle Said That the Company is prepared to cover any shortfall in USDC reserves that materializes from their exposure to SVB using corporate resources, which may also include outside capital.
The announcement came after it was revealed that Circle had $3.3 billion of its $40 billion USDC reserves held in an account at fallen lender Silicon Valley Bank.
In a blog post, the company detailed wire transfer requests were made on Thursday, but they weren’t completed as of late Friday. “We have reason to believe that under applicable FDIC policy, transfers initiated before the bank entered receivership would otherwise be processed normally,” the company said.
In other words, Circle hopes that the FDIC, which acquired SVB on Friday, will allow transactions initiated before the agency’s takeover to settle in the normal way.
The company further added that USDC liquidity operations will resume as normal when banks in the United States open on Monday morning. “As a practical matter, our teams are well prepared to handle significant volumes, built on strong liquidity and reserve assets discussed below.”
Silicon Valley Bank, one of the most popular lenders to Silicon Valley tech and growth startups, failed on March 10. fall into hands of the Federal Deposit Insurance Corporation (FDIC). On Friday, the federal agency took control of the bank and created Deposit Insurance National Bank of Santa Clara, which now holds deposits insured from SVB.
USDC Remains Strong
The USDC issuer has also assured users that the stablecoin is still in good shape. citing a audit Circle, a leading insight and audit firm by Deloitte, said it holds 77% of its reserves in Treasury bills (Bills) maturing in four weeks to 28 weeks.
These T-bills are held at BNY Mellon and managed by BlackRock, the world’s largest asset manager. “US Treasury Bills are the most liquid asset in the world and are direct obligations of the US government,” the company said.
The remaining 23% ($9.7 billion) of USDC reserves are in cash. The bulk of that tally, or $5.4 billion, is held at BNY Mellon, one of the world’s largest and most stable financial institutions. Another $1 billion of USDC reserves is held by the customer bank.
“USDC poses zero risk to Silvergate; we moved limited reserves to support transaction settlement with USDC prior to the bank shutdown,” the company said.
USDC holders expect to be able to redeem their tokens for as low as $0.93, according to an analysis by Hal Press, founder of digital asset investment platform North Rock Digital. “Overall even if we assume that whatever bank they have cash in liquidates and returns 70% of the cash through asset sales in a worst case scenario, USDC would still be worth 93c. “
Meanwhile, USDC, which fell to an all-time low of around $0.8774 on Saturday amid growing uncertainty, has since pared some losses. The stablecoin is currently trading above $0.95, up over 4% over the past day.