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Circle, the USDC issuer, has pledged to cover any shortfall in stablecoin reserves if it does not receive the full $3.3 billion held by the now-defunct Silicon Valley Bank.
In a blog post on Saturday, Circle stated that the company is prepared to cover any shortfalls in USDC reserves that arise as a result of their exposure to SVB using corporate resources, which may even involve outside capital.
It follows news that Circle holds $3.3 billion of its $40 billion USDC reserve in an account at the defunct Silicon Valley Bank.
In a blog post, the company detailed the wire transfer request it made on Thursday but had not been completed by the end of Friday. “We have reason to believe that transfers initiated prior to the bank’s entry into takeover would have been processed normally under applicable FDIC policy,” the firm added.
In other words, Circle expects the FDIC, which overtook SVB on Friday, to allow transactions initiated before the agency took over to settle in the normal course.
The firm further noted that USDC liquidity operations will return to normal when Bank of America opens its doors Monday morning. “As a practical matter, our teams are well positioned to handle a high volume of transactions, based on the strong liquidity and reserve assets discussed below.”
Silicon Valley Bank, one of the most popular lenders to Silicon Valley tech and growth startups, collapsed on March 10, falling into the hands of the Federal Deposit Insurance Corporation (FDIC). On Friday, the federal agency took over the bank and created the Santa Clara Deposit Insurance National Bank, which now holds SVB’s insured deposits.
USDC Continues to Remain Strong
The USDC issuer also assured users that the stablecoin is still in good shape. Circle cited an audit report from Deloitte, a large insights and auditing firm, saying 77% of its reserves were in short-term Treasury bills (Bills) held with maturities ranging from four weeks to 28 weeks.
The Treasury bills are held by BNY Mellon and managed by BlackRock, the world’s largest asset manager. “U.S. Treasury bills are the most liquid assets in the world and are a direct obligation of the U.S. government,” the firm said.
The remaining 23% ($9.7 billion) of USDC reserves are in cash. Most of that, or $5.4 billion, is held by BNY Mellon, one of the largest and most stable financial institutions in the world. Another $1 billion in USDC reserves is held by client banks.
“USDC has zero exposure to Silvergate; we have rolled out limited reserves to support settlement of transactions with USDC prior to bank closure,” the firm added.
According to an analysis by Hal Press, founder of Crypto asset investment platform North Rock Digital, USDC holders are expected to cash out their tokens at a price of at least $0.93. “All in all, even if we assume, every bank they hold cash in goes under, worst case 70% cash back via asset sale USDC is still worth 93c.”
Meanwhile, USDC fell to an all-time low around $0.8774 on Saturday and has since pared some losses amid rising uncertainty. The stablecoin is currently trading above $0.95, up more than 4% over the past day.
Source of information: Compiled from CRYPTONEWS by 0x Information.Copyright belongs to the author, without permission, may not be reproduced