Circle faces criticism for the lack of transparency after saying that $3.3b in USDC is with SVB

Updated: 11 March 2023

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Investors became highly concerned recently regarding the future of the Silicon Valley Bank (SVB) after it decided to announce a significant sale of assets and stocks aimed at raising capital. With the move coming only a day after another crypto-friendly bank, Silvergate shut down, many became convinced that all was not well with SVB, leading the investment community to panic.

Only hours later, the bank collapsed and was placed in FDIC receivership. Following this, the crypto payments company Circle, which launched the USDC stablecoin — the second-largest stablecoin in the crypto industry — revealed that $3.3 billion in funds used to back USDC remain with SVB.

Initially, the company tweeted that Silicon Valley Bank was one of the six banking partners managing a total of 25% of the total USDC reserves.

Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally.https://t.co/NU82jnajjY

— Circle (@circle) March 10, 2023

This revelation earned quite a bit of criticism from Crypto Twitter for the lack of transparency about its exposure to the tech banker. Not only that, but the revelation also led to USDC de-pegging from $1, and its value per token dropping by 2% on a number of decentralized finance platforms.

Both Silvergate and SVB were among Circle’s banking partners

Following the initial tweet, Circle published a thread explaining that it initiated a transaction on Thursday to remove balances, but it was not processed in time. “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.”

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

Circle continued by saying that, just like other customers and depositors who used SVB, it now joins calls for continuity of the tech banker. It also added in a follow-up tweet that it plans to follow the guidance provided by state and federal regulators.

However, the failure of Silicon Valley Bank is a big deal, not only because it was tied to many tech and crypto companies and startups but also because it is the largest bank to fail since the financial crisis of 2008. In fact, it was one of the top 20 largest banks in the US. Now, however, the FDIC seized control over it, as the bank collapsed only a day after Silvergate.

To make matters worse for Circle, the crypto firm also counted Silvergate as one of its banking partners. The incidents are likely to leave a number of crypto projects, as well as traditional companies that worked with these banks, in a very difficult situation. Also, since the collapse of the two banks came so quickly after the collapse of FTX, many expect that this will be the push that will lead crypto participants back to fully decentralized projects.

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