Stablecoin issuer Circle announced late Friday that around $3.3 billion of its $40 billion USDC reserve remains at Silicon Valley Bank. It comes after the high-tech lender’s share price fell sharply in response to deposits by nervous consumers.
Silicon Valley Bank crumbled on Friday morning, sending shockwaves through cryptocurrency and global markets, 48 hours after the capital crisis triggered the collapse of the second US financial institution in history.
With a total supply of $43.5 billion, all backed by government bonds and cash equivalents, USDC is the second largest stablecoin in circulation.
Regulators Kill Silicon Valley Banks
According to data from CoinMarketCap, USDC’s market capitalization fell to $42.4 billion on Friday. The USDC was also de-pegged from $1, hinting at concerns about existing reserves.
Silicon Valley Bank has been shut down by California banking regulators, which are now responsible for the lender’s deposits, a press statement Friday from the Federal Deposit Insurance Corporation showed.
Image: Getty Images
Based on the report, the FDIC has set up a new bank, National Bank of Santa Clara, which will hold all of SVB’s assets.
With assets of about $209 billion at the end of 2022, Santa Clara-based SVB, known for lending to some of the biggest technology companies, is listed as the sixteenth largest bank in the United States.
In an effort to shed some light on the issue, Circle reported on March 10 via Twitter that:
1 / After confirming at the end of today that the wire that started on Thursday to clear the balance has not been processed, $3.3 billion of the ~$40 billion USDC reserves remain in SVB.
– Circle (@circle) March 11, 2023
In its most recent audit, Circle disclosed that as of January 31, $8.6 billion, or nearly 20% of its reserves, were held in several financial institutions, including the recently bankrupt Silvergate and the inactive SVB. As a result, at the end of this week, worries about the USDC.
USDC Depegs From US Dollar After SVB Collapses
On Friday afternoon in New York, the USD Coin price dropped to $0.9850. Stablecoins such as USD Coin are designed to maintain 1:1 parity with highly liquid assets such as the US dollar or the euro.
With over $40 billion in circulation, the Circle token is second only to Tether’s USDT.
The specifics of the bank’s quick liquidation are a mishmash at the time of writing, but the US Federal Reserve’s continued interest rate hikes over the past year, which have tightened financial conditions in the startup sector where SVB is a prominent player, appear to have been one of the main causes of the bank’s closure. mentioned.
On Wednesday, SVB announced that it had sold some instruments at a loss and would sell $2.25 billion in new shares to strengthen its balance sheet.
Major venture capital firms are reportedly instructing companies to withdraw funds from banks in response and panic.
Crypto total market cap currently at $911 billion on the daily chart | Chart: TradingView.com
What Now?
Thursday, SVB shares fell, pulling other banks. As of Friday morning, the company had halted stock trading and rejected efforts to immediately raise funds or find a buyer.
Meanwhile, while other crypto companies have issued statements denying anything to do with Silicon Valley Bank, Circle has only said that it is “making an internal response.”
On Friday evening, the company’s official Twitter account issued the following message:
Silicon Valley Bank is one of six banking partners that Circle uses to manage its ~25% share of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will affect depositors, Circle & USDC continue to operate as normal.https://t.co/NU82jnajjY
– Circle (@circle) March 10, 2023
-Images shown are from Twitter