Circle, the issuer of the USDC stablecoin, said it will use corporate resources and “external capital where necessary” to ensure that USDC can be redeemed at a 1:1 ratio to the U.S. dollar.
The statement came in response to news that bankrupt Silicon Valley Bank’s cash reserves were short by $3.3 billion.
Circle said in a blog post that it is required by law to “back” its USDC stablecoin, which is currently 77 percent collateralized by U.S. Treasury bonds and 23 percent by cash held by various institutions, of which SVB is just one.
CEO Jeremy Allaire also confirmed the claim on Twitter, adding that the company will use corporate resources and outside capital as necessary to ensure that USDC remains redeemable at a 1-to-1 exchange rate against the U.S. dollar.
Tl;Dr: While USDC can be used on-chain 24/7/365, issuance and redemption are limited by the working hours of the US banking system.
Liquidity operations in USDC will resume normal when Bank of America opens its doors Monday morning. In fact, our team is… https://t.co/6Y3SGop4t2
— Jeremy Allaire (@jerallaire) March 11, 2023
USDC lost parity with the U.S. dollar last week following the collapse of Silicon Valley Bank and news that USDC’s $3.3 billion in cash reserves were held by banks surpassed by the FDIC.
The stablecoin fell to a 2019 low of $0.87, but has recovered some ground and is currently trading at $0.95.
Share the latest developments in USDC and Silicon Valley Bank. https://t.co/Ug3qpot8sJ
— Jeremy Allaire (@jerallaire) March 11, 2023
Circle reiterated its earlier statement that USDC is fully collateralized with cash and U.S. Treasuries, emphasizing that it has sufficient liquidity to guarantee that the stablecoin can be redeemed 1:1 against U.S. dollars.
Specifically, 77% ($32.4 billion) of stablecoin collateral consists of U.S. Treasury bonds with maturities of three months or less, while the remaining 23% ($9.7 billion) is secured by a variety of institutions, including Silicon Valley Bank. cash on hand.
To reduce the risks associated with holding cash in the bank, Circle deposited $5.4 billion with BNY Mellon. Consumer banks also hold another $1 billion in USDC reserves.
Circle also maintains USDC trading and clearing accounts at Signature Bank.
Circle, the issuer of the USDC stablecoin, said it had begun transferring $3.3 billion to other banking partners, but those transfers had not been completed by Friday’s close.
However, the company is confident in the FDIC’s management of the SVB situation and is prepared to receive the funds once they are transferred.
While the collapse of Silicon Valley Bank has raised concerns among cryptocurrency investors, Circle emphasized that USDC has no exposure.
Additionally, the firm assured investors that USDC liquidity operations will resume as usual when Bank of America opens on Monday.
Given its liquidity and strong reserve assets, the Circle team is prepared to handle a high volume of transactions.
Circle also expressed hope that the FDIC, as the overtaker of Silicon Valley Bank, will seek a swift buyout and a franchise as strong as SVB’s to ensure all depositors are compensated.
The company’s commitment to backing USDC is expected to reassure investors and help stabilize the stablecoin’s value.
Source of information: Compiled from CRYPTO by 0x Information.The copyright belongs to the author MIA, and shall not be reproduced without permission