The USD Coin (USDC) stablecoin has pulled away from its intended $1 peg following the revelation that Circle is in contact with the now-collapsed Silicon Valley bank.
USDC issuer Circle, the world’s second-largest stablecoin, said in a Friday tweet that the fallen lender held $3.3 billion of the $40 billion USDC reserves. The company detailed that it placed wire transfer requests on Thursday, but they were not completed as of late Friday.
“After confirmation late today that the wires initiated on Thursday to remove the balance had not yet been processed, $3.3 billion of the $40 billion of USDC reserves remains in SVB.”
The company’s stablecoin was affected by redemptions following the news as concerns grew about its reserves. According to blockchain analysis firm Nansen, the stablecoin burned roughly $2.34 billion of USDC on Friday, pulling the token out of circulation as investors cashed in dollars.
The wave of withdrawals put some pressure on USDC’s dollar peg, pulling it away from the intended $1. According to data from crypto aggregator Coinmarketcap, the price of the stablecoin fell to an all-time low of around $0.8774 on Saturday.
However, USDC price has since recovered some losses. Currently, the stablecoin is trading at $0.919, down almost 8% over the past day.
Silicon Valley Bank, one of the most popular lenders to Silicon Valley tech and growth startups, failed on March 10, falling into the 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.
Federal agency “Silicon Valley Bank, Santa Clara, California, was closed today by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver.” Said in a press release on Friday.
Apart from Circle, several other crypto companies have also disclosed their exposure to the bank. As informed ofBankrupt crypto lender BlockFi has $227 million of uninsured funds stuck in an account created by the failed lender.
In addition, crypto-focused venture capital firm Pantera may also have an unknown amount of exposure to the collapse of SVB. As recently as last month, the firm counted the failed bank among just three custodians of its private funds, according to a February 3 SEC filing. Admission,
Avalanche Foundation, which backs Avalanche Blockchain, Era Labs, the entity behind the Bored App Yacht Club NFT project, and a few other blue-chip collections, as well as Web3 company Proof, are some of the other crypto companies that have hit hard lately. are given. The collapse of Silicon Valley Bank.
Circle is still in good shape
Despite the recent pressure on USDC that caused it to lose its peg, the stablecoin is still in good shape. according to a audit By Deloitte, a leading insight and audit firm, Circle holds 77% of its reserves in Treasury Bills (Bills) with maturities ranging from four weeks to 28 weeks.
These T-bills are held at BNY Mellon and managed by BlackRock, the world’s largest asset manager. Reportedly, this alone offers a full floor on $0.77 USDC, according to an analysis by Hal Press, founder of digital asset investment platform North Rock Digital.
The crypto proponent further pointed out that the other banks that Circle used to store its cash reserves, including Citizens Trust Bank, Consumers Bank, New York Community Bank (a division of Flagstar Bank, NA) and Signature Bank, are all apparently fine. .
Press said that even in a worst-case scenario, Circle holders expect to be able to cash out for at least $0.93 per USDC token. “Overall even if we assume that whatever bank they have cash in liquidates and in a worst case scenario returns 70% of the cash via asset sales, USDC would still be worth 93c. “