The popular stablecoin USDC regained its $1 peg after U.S. regulators assured Silicon Valley Bank (SVB) depositors could withdraw their money today.
The government assurances mean all SVB depositors will remain intact, even though the bank has collapsed and investors have been looted of their funds. Circle, the USDC issuer, was one of the bank’s depositors and lost an estimated $3.3 billion in the bank’s collapse.
Circle’s total USDC reserves at the time were approximately $40 billion, but SVB’s losses were still significant enough to cause USDC to be temporarily depegged. On Saturday and Sunday, USDC traded in the $0.90 to $0.95 area for a long time.
USDC prices for the last 7 days. Source: CoinGecko
As of Monday morning, USDC was re-pegged to the U.S. dollar after Circle promised that all outstanding USDC tokens would still be redeemable for $1, even if the company needs to finance it with outside capital.
“[Circle] USDC will be supported and any shortfall will be covered using corporate resources, involving outside capital if necessary,” the company said in a statement.
DAI depegged…and restored
As USDC recovers, DAI, a decentralized stablecoin partially backed by USDC, also regained lost ground on Sunday and Monday. Along with USDC, the dollar-pegged token fell to lows around $0.90 on Saturday, but has since recovered to the $1 level.
At the time of writing, DAI was trading at $0.999, up 3.2% over the past 24 hours, according to data from CoinGecko.
DAI price for the last 7 days.Source: CoinGeckoRegulators Step In
The resurgence of both stablecoins came after U.S. regulators stepped in on Sunday and promised that bank depositors would still have access to all their funds despite the closures. This helped the market regain confidence in the token, bringing it back to the $1 peg at press time.
The commitment came in the form of a joint statement from the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC). The three regulators said they expected the move to “protect the U.S. economy by enhancing public confidence in our banking system.”
Fed offers ‘additional funding’
Later, another statement from the Fed said the central bank would provide “additional funding” to banks to ensure their ability to honor withdrawals.
“Additional funding will be provided through the creation of a new Bank Term Financing Program (BTFP) to provide loans for up to one year to banks, savings associations, credit unions, and other eligible depository institutions against U.S. Treasury securities, agency debt, and mortgages loan-backed securities, and other eligible assets as collateral,” the Fed statement said.
The circle is “relieved” to see the government’s actions
In comments posted on Twitter, Circle CEO Jeremy Allaire said he was “glad” to see the government take action. He noted that 100 percent of SVB’s deposits are safe and serviceable, and said his firm would not transfer its SVB deposits to BNY Mellon.
“We are committed to building a robust and automated USDC settlement and reserve operation with the highest quality and transparency,” added the Circle CEO.
Source of information: Compiled from CRYPTONEWS by 0x Information.Copyright belongs to the author, without permission, may not be reproduced