Crypto has been getting MASSIVE backlash with “stablecoins” and the people behind them manipulating the asset, using investor’s funds, and/or straight up stealing investor’s funds from the liquidity pools. Crypto has never seen so much downfall and now that Circle Internet Financial Silicone Valley Bank just fell that held $3.3 Billion Dollars in $USDC is now locked up. Circle Internet Financial, the issuer of the stablecoin USDC, has promised to “cover any shortfall” in the assets backing the stablecoin. This comes after the Federal Deposit Insurance Corporation (FDIC) seized the assets of Silicon Valley Bank (SVB), where Circle was holding $3.3 billion of USDC’s cash reserves.
In a blog post, Circle assured its users that it would use its corporate resources and external capital to fill any gap in USDC reserves, if necessary. The company stated that it will “stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
USDC is a stablecoin designed to be pegged to the US dollar, with its value remaining stable at $1. However, the collapse of SVB caused the value of USDC to drop below its intended peg, falling as low as $0.88 in the last 24 hours. After Circle’s announcement, the value of USDC rebounded to $0.97, according to Coingecko.
Circle stated that it had attempted to move its assets out of SVB before its collapse and that the transaction could settle on Monday when US banks resume normal operations. However, the company also acknowledged the possibility that SVB may not return 100% of its assets, and any return might take some time, as the FDIC issues IOUs and advanced dividends to deposit holders.
The news of Circle’s pledge to cover any shortfall in USDC reserves has sparked a rally in the stablecoin’s value, with many crypto traders feeling reassured by the company’s commitment to maintain the stability of USDC. The stablecoin has become an important tool for crypto traders, providing a means of holding value in a stable currency while still participating in the crypto market’s volatility. The stability of USDC is critical to maintaining trust in the crypto market and ensuring that traders have access to a reliable and trustworthy means of holding value.
USD Coin (USDC) is a popular stablecoin in the crypto markets that is supposed to maintain a value of $1, backed by reserves of cash and short-dated Treasuries. However, about $3.3 billion of the $40 billion stockpile is with Silicon Valley Bank, which was seized by regulators on Friday, making it one of the largest US bank failures in recent history. As a result, there is uncertainty about the return of deposits, and USDC fell below $1, trading at about 92 cents as of Saturday morning in London. Other stablecoins such as DAI and Pax Dollar also fell from their pegs, indicating wider nervousness. However, Tether, the top stablecoin, held at $1 despite previous scrutiny over its reserves.
The fall of Silicon Valley Bank has been described as a “black swan failure” by Circle’s Chief Strategy Officer Dante Disparte, who warned of broader implications for business, banking, and entrepreneurs without a federal rescue plan. USDC has a circulating supply of about 41 billion tokens and a market value of roughly $37 billion, according to CoinGecko data. In the past 24 hours, a net $2 billion of USDC was redeemed, and Bloomberg data indicated that USDC traded as low as 81.5 cents. Coinbase Global Inc. announced a temporary pause on the conversion of USDC into US dollars during the weekend, resuming on Monday when banks open.
The fall in USDC has had a knock-on effect on decentralized finance (DeFi) applications, which let users trade, borrow, and lend coins and tend to rely heavily on trading pairs involving the stablecoin. Teong Hng, CEO of crypto investment firm Satori Research, warned that markets would be ugly again next week unless there’s a concrete bailout plan this weekend for the failure of SVB.
The crypto sector has been reeling from a prolonged rout, which has wiped $2 trillion off the value of digital assets since November 2021 and has led to a series of implosions such as the TerraUSD stablecoin, the Three Arrows Capital hedge fund, and the FTX exchange. The TerraUSD token, known as UST, tried to use a mix of algorithms and trader incentives involving a sister token, Luna, to hold its value. The $60 billion wipeout of that system intensified global regulatory scrutiny of stablecoins.
Crypto firms including Binance and Tether used Twitter to reassure their customers about any risks posed by the failed bank. Changpeng Zhao, CEO at Binance, tweeted that the firm doesn’t have exposure, and its funds are safe. Paxos Trust Co., issuer of Pax Dollar, and crypto exchange Gemini said they have no relationship with the bank. Tether’s Chief Technology Officer Paolo Ardoino also said that the largest stablecoin doesn’t have exposure to SVB. However, bankrupt crypto lender BlockFi has about $227 million in an account at the failed bank, according to a court filing.
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