Following the bankruptcy from Silicon Valley Banka large bank holding part of the cash reserves from Circlethe stablecoin USD Coin (USDC) a lost his anchor at dollar.
Friday late afternoon, Silicon Valley Bank (SVB) was closed by the US authorities as the financial institution was in the grip of a banking panic.
Early March, Circle declared to have a part of the reserves in cash of theUSDC – representing a total of approximately $9.8 billion – at Silicon Valley Bank to January 17, 2023, but did not specify the amount. The amount was allocated as follows among several banks including Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank or Silvergate Bank, which also closed its doors this month.
The stablecoin issuer said last night at about 4:00 a.m. that exact amount currently blocked at SVB on his Twitter account.
3.3 billion of USDC’s ~$40 billion in reserves is at SVB. Like other customers and depositors who have relied on SVB for banking services, Circle joins the calls for continuity of this important bank in the U.S. economy and will follow the guidance provided by state and federal regulators.” tweeted Circle.
Within an hour of the announcement, the stablecoin launched by the American firm in partnership with Coinbase began to lose parity with the dollar and its price finally fell below 0.90 dollar. At the time of publishing this article, the USDC rate is hovering around $0.92, according to CMC data, and the token has a market cap of $37 billion, up from $43 billion as of 8 p.m. Friday.
The depeg of the USDC thus seems to stem from the fear of its holders of seeing the 3.3 billion in USDC reserves frozen at SVB indefinitely, if not lost.
“The unexpected collapse of SVB and USDC’s potential exposure to SVB created the panic and people started fleeing to the USDT,” commented Michael Egorov, founder of Curve Finance, on Bloombergnoting that DAI, another major stablecoin, was ” not a safe haven ” as the token was partially backed by USDC. The latter also saw its anchor break early this morning in the wake of USD Coin’s problems.
Meanwhile, Coinbase, Circle’s partner on USDC, announced overnight that its platform suspended USDC to USD conversions this weekend because the banks were closed.
During busy periods, conversions depend on USD transfers from banks that are cleared during normal bank hours. When the banks open on Monday, we plan to resume conversions.” added exchange.
The founder of Curve was quite confident for what comes next. “the situation could improve once the buybacks start working on Mondayand some traders will buy cheap USDC and buy back 1:1 against USD,” he said.
To wit, Circle keeps most of the remaining (non-cash) USDC reserves in a fund managed by BlackRock that invests primarily in US Treasury bonds.
At the same time, the stable digital coin of its rival Tether has seen its price rise to nearly 1.03 dollars. The USDT rate shows 1.01 dollar at the time of publication.
Follow Corners.en on Twitter, Linkedin, Facebook or Telegram to not miss anything. Subscribe to our crypto newsletter to receive a news summary every week.