Circle finally assures investors that it will support USDC

The company that issuing USDC stablecoins, Circle, has stated that it will “fill any shortfall” brought on by the $3.3 billion in its funds that were held by the defunct Silicon Valley Bank.

Circle stated in a blog post that it is required by law to “stand behind” USDC and that any shortfall will be made up using internal funds and, if necessary, “external capital” to ensure that the stablecoin may be redeemed at a 1:1 ratio with the dollar. CEO Jeremy Allaire reaffirmed the dedication in a thread on Twitter.

Following a bank run on Silicon Valley Bank on Friday and the revelation that $3.3 billion in USDC’s cash reserves were held by the bank that the FDIC had taken over, USDC lost its peg to the U.S. dollar.

Sharing an Update on USDC and Silicon Valley Bank. https://t.co/Ug3qpot8sJ

— Jeremy Allaire (@jerallaire) March 11, 2023

According to CoinGecko, overnight USDC dropped to $0.87, its lowest level since 2019, before reclaiming ground and currently trading at $0.95.

The collateralization of Circle

Circle emphasized that all of the USDC is secured by cash and US Treasury securities.

According to Circle’s statement,

USDC is now collateralized 77% ($32.4B) with U.S. Treasury Bills (with a three month or shorter maturation term) and 23% ($9.7B) with cash stored at a variety of institutions, of which SVB is only one.

Circle claims that the remaining 23%, or roughly $9.7 billion, is in cash. In order to “lower bank risk,” Circle deposited $5.4 billion with BNY Mellon. According to the corporation, Consumer Bank also has $1 billion in USDC reserves, and Circle also has transaction and settlement accounts with Signature Bank for USDC.

“SVB still has $3.3 billion of USDC’s cash reserves,” Circle stated.

We started transferring this money to other banking partners on Thursday. Despite the fact that these transfers had not yet been completed as of Friday’s business closure, we continue to have faith in the FDIC’s handling of the SVB situation and are prepared to accept these payments.

While Silicon Valley Bank is the cause of Circle and USDC’s problems, the business also stated that USDC has no exposure to the defunct cryptocurrency-friendly bank Silvergate, claiming that it transferred the “minimal reserves” it held there before to the bank’s closure.

We are awaiting Monday.

Circle said that while USDC is on-chain, U.S. banking hours restrict its issuance and redemption, adding that USDC liquidity activities will resume “as normal” when banks open on Monday as the ripple effect from Silicon Valley Bank’s bankruptcy continues.

According to Circle, its teams are “practically well-prepared to handle significant volume, built on the strong liquidity and reserve assets discussed below.” The company also stated that it thinks the FDIC will permit transfers that were started before Silicon Valley Bank went into receivership to proceed normally.

According to Circle,

We are hopeful that the FDIC as receiver will seek a rapid purchase and assumption of a franchise as strong as SVB’s to ensure all depositors are made whole.

Related

• Silicon Valley Bank collapses, triggers bank run in USDC
• Silicon Valley Bank shares crash by 60% one day after crypto bank Silvergate shut down
• Crypto Bank Silvergate Decides To Shut Down Operations