The financial sector has had a chaotic few days. Especially, for USDC stablecoin and Silicon Valley Bank and its stakeholders, because the lender is not considered strong and profitable until it is closed by the authorities in less than 48 hours.
Today, lifebuoys are only thrown to save sinking banks and others drowning in problems.
The US government and financial regulators have announced that individuals with assets deposited in troubled Silicon Valley Bank will have access to their funds.
USDC Reserves Accessed Today
In a tweet Monday morning, Circle Co-founder and CEO Jeremy Allaire announced that the company is “pleased” with the US Federal Reserve’s efforts to address the risks posed by the “fractional” banking system.
Update thread on USDC
We are very pleased to see the US government and financial regulators taking important steps to reduce risks from a fragmented banking system.
100% of the deposits from SVB are safe and will be available at the bank open tomorrow.
— Jeremy Allaire (@jerallaire) March 12, 2023
Allaire stated that “100%” of Silicon Valley Bank’s deposits are safe and will be accessible when the bank opens today, March 13.
In his tweet, Allaire added that the company will rely on BNY Mellon to facilitate the minting and redemption process.
Source: Getty Images
Circle announced late Friday that about $3.3 billion of its $40 billion USDC reserves remain at Silicon Valley Bank. It comes after the tech-focused lender’s share price fell due to a panicked consumer reaction to deposits.
Moments after the capital crisis led to the second largest failure of a US financial institution in history, SVB’s downfall sent shockwaves through cryptocurrency and global markets.
Allaire said:
“We are committed to building a robust and automated USDC reserve settlement and operation with the highest quality and transparency.”
US Government To The Rescue
On Sunday night, the US regulator announced emergency measures to contain the contagion caused by the failure of Santa Clara, California-based SVB and guarantees to protect all depositors.
The announcement was made in a joint statement by US Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell, and Federal Deposit Insurance Corp Chairman Martin Gruenberg.
“Today we are taking important action to protect the U.S. economy by strengthening public confidence in our banking system,” said a joint press release.
According to the statement, after receiving recommendations from the FDIC and Federal Reserve boards, depositors will have full access to funds from March 13.
“To support American businesses and households, the Federal Reserve Board on Sunday announced it will provide additional funding to eligible depository institutions to ensure banks have the ability to meet the needs of all depositors,” the press said.
To help banks, savings organizations, credit unions, and other qualifying depository institutions, the Federal Reserve Board announced in a separate statement the creation of a $25 billion Bank Term Funding Program (BTFP) that provides loans for up to one year. .
Circle Guaranteed Against Loss
This means that Circle will not suffer any loss of funds as a result of the bailout as depositors will return to their home countries.
The US government’s emergency procedures also applied to other financial institutions, including the defunct Signature bank.
Meanwhile, the Stablecoin Payments Act, which is still being worked on by Congress, would establish a legal system where stablecoin money would be deposited in cash at the US central bank and short-term Treasury bills, Allaire said.
“We need this law now more than ever if we want the financial system to be truly safe,” CEO Circle said.
Indeed, the Stablecoin Payments Act, which remains a very active endeavor for Congress, would enact a regime in which stablecoin funds would be held in cash at the Fed and short-term T-Bills. We need this law now more than ever if we want a truly safe financial system.
— Jeremy Allaire (@jerallaire) March 12, 2023
Crypto total market cap currently at $994 billion on the daily chart | Chart: TradingView.com
USDC Regains Dollar Peg; Bitcoin is up
Futures linked to the Dow Jones Industrial Average jumped more than 300 points in pre-market trade in response to the development.
Data from crypto market tracker Coingecko shows that cryptocurrency prices have also recovered significantly, with Bitcoin up 10% in the last 24 hours.
Circle’s USDC, the second largest stablecoin, regained the $1 peg following Allaire’s assurance that its holdings were safe.
According to Coingecko data, USDC is currently trading at $0.99, up 3.3% in the last 24 hours.
-Images shown are from Freepik