Circle pledges to cover $3.3 billion USDC shortfall held at Silicon Valley Bank

Circle pledges to cover $3.3 billion USDC shortfall held at Silicon Valley Bank
Circle pledges to cover $3.3 billion USDC shortfall held at Silicon Valley Bank

USDC, the second-largest stablecoin by market capitalisation, saw its peg to the US dollar plummet after it was revealed that $3.3 billion of its funds were held by the now-collapsed Silicon Valley Bank. However, issuer USDC Circle says it will “cover any shortfall” using its own corporate resources and external capital if necessary to maintain a 1:1 ratio against the US dollar. Circle also reiterated that USDC is 100% backed by cash and US Treasuries.

Current USDC collateral consists of 77% in US Treasury bills with maturities of three months or less and 23% in cash held at various institutions. The remaining $9.7 billion in cash is held at BNY Mellon to reduce bank risk, while Consumer Bank holds another $1 billion in USDC reserves. Circle maintains transaction and clearing accounts for USDC at Signature Bank.

Despite exposure to Silicon Valley, Bank Circle assures USDC has zero exposure to crypto-friendly bank Silvergate, which transferred its “limited reserves” before the bank closed. USDC liquidity operations are expected to resume “business as usual” when banks open on Monday, with Circle expressing confidence in the FDIC’s handling of the SVB situation.

As the contagion from SVB’s collapse spreads, Circle remains hopeful that the FDIC will pursue a quick purchase and takeover of the strong franchise to ensure all depositors are okay. While USDC liquidity may have been affected by this development, Circle’s commitment to maintain a 1:1 ratio against the US dollar may help restore confidence in the stablecoin.

In conclusion, although the USDC has experienced a temporary setback due to the collapse of Silicon Valley Bank, Circle’s assurances and commitments may help soften the impact on the stablecoin. How the situation will play out remains to be seen, but USDC’s resilience and stability may help maintain confidence in the broader cryptocurrency market.

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