Circle, the platform responsible for issuing USD Coin (or USDC), recently disclosed that nearly $3.3B (nearly $40B) of its cumulative USDC reserves remain with Silicon Valley Bank. This was confirmed after the share price of the high-tech lending entity fell. The corresponding price drop was the result of a run on unwilling user deposits.
Circle Reveals $3.3B Worth of Its USDC Reserve Has Not Been Withdrawn From Silicon Valley Bank
Global cryptocurrency markets witnessed a massive shock as Silicon Valley crumbled on Friday. This happened just 48 hours after the start of the capital crisis, the second largest collapse of a US financial entity in history.
The cumulative supply of the USDC stablecoin is close to $43.5 billion. Stablecoins are backed by government bonds as well as cash equivalents. USDC is considered the second largest stablecoin in terms of circulation.
According to data provided by CoinMarketCap, USDC’s market cap recently plummeted to $42.4B. The token is also depegged from its $1 mark. This raises a lot of concerns about the coin’s current reserves. Banking regulators in California shut down Silicon Valley Bank.
So, as the FDIC said in a press statement Friday, they are currently managing deposits with lenders. As the report notes, the FDIC has created a unique bank called the Santa Clara National Bank. The corresponding bank is established to maintain all assets related to SVB.
With an asset value of up to $209B by the end of 2022, SVB is getting a lot of attention as a well-known lending company. It has been making loans to some of the biggest tech platforms. Silicon Valley Bank is listed as the 16th largest banking institution operating in the US jurisdiction. While working to clarify the issue, Circle issued a statement on its official Twitter channel on the 10th of this month.
The stablecoin issuer claims that its USDC reserves valued at approximately $3.3B remain in SVB. In a recent audit by Circle, nearly twenty percent ($8.6B) of the platform’s reserves were held by several financial entities as of Jan. 31. The companies considered the defunct SVB and the recently insolvent Silvergate. So, recently, some concerns have been raised about stablecoins.
USD Coin Depegs From Dollar After SVB Crash
On Friday, the price of USDC dropped to $0.9850. Stablecoins like this are structured to maintain close to 1:1 parity with sizable liquid assets like EUR and USD. The circulation of USD Coin stablecoin is nearly 40 billion US dollars. This puts it second only to Tether’s USDT stablecoin. The exact circumstances surrounding the rapid dissolution of the bank are unclear.
Still, the Fed’s continued rate hikes in the previous year appear to have been one of the main reasons for the banking institution’s collapse. With these rises, financial conditions for start-ups have tightened, and SVB has a strong position on that front.
Top venture capital firms are reportedly advising entities to redeem funds from the platform, while dealing with the panic caused by the plunge in SVB stock.
Information source: compiled from HERALDSHEETS by 0x information.Copyright belongs to the author Solomon Odunayo, without permission, may not be reproduced