USDC issuer, Circle, has announced that $3.3 billion of its reserves are currently stuck in Silicon Valley Bank causing the value of Circle’s stablecoin to drop as the cryptocurrency market reels from the failure of two banks within a week.
“$3.3bn of USDC’s cash reserves remain with SVB. As of Thursday, we had initiated transfers of these funds to other banking partners. Though these transfers had not yet been settled as of close of business Friday, we remain confident in the FDIC’s management of the SVB situation and stand ready to receive these funds,” Circle said in a blog post.
Silicon Valley Bank Collapses:
What we know:
* The bank was a major lender to tech start-ups
* Had $209 in assets & 17 branches in CA, MA
* Had unknown deposit amounts in excess of insurance limits
* To be liquidated by FDICThis is the biggest bank failure since 2008 pic.twitter.com/XLwFTgAx6V
— BitKE (@BitcoinKE) March 11, 2023
Considered to be a leading financial institution for innovation-focused companies, entrepreneurs, and investors, Silicon Valley Bank (SVB) experienced massive withdrawals from panicked depositors 48 hours after news came out on Wednesday that it was seeking to raise $2.25 billion to shore up its balance sheet.
This led the United States Federal Deposit Insurance Corporation (FDIC) to step in and put the bank’s deposits under administration on March 12 2023 as SVB became the second largest bank collapse in U.S history after Lehman brothers in 2008.
“SVB’s fate is being decided this weekend by the FDIC and it’s our hope that they will find a solution that protects customers’ assets 100%,” Circle said in its blog post.
While Circle is hopeful to get back at least some of its deposits come March 13 2023, the stablecoin issuer admits it is also possible that SVB may not return 100% and that any return might take some time.
“In such a case, Circle, as required by law under stored-value money transmission regulation, will stand behind $USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
The $USDC issuer is just one of several tech firms and startups whose deposits are stuck in the bank with the fate of these funds remaining unclear as the Federal Deposit Insurance Corporation (FDIC) stepped in to administer the bank.
Some of the biggest SVB depositors include:
- Circle – $3.3 billion
- Roku – $487 million
- BlockFi – $227 million
- Roblox – $150 million
- Ginkgo Bio – $74 million
- iRhythm – $55 million
- Rocket Lab – $38 million
- Sangamo Therapeutics – $34 million
- Lending Club – $21 million
- Payoneer – $20 million
It is thought that SVB held deposits from tens of thousands of small businesses including many startups and there is panic that they may go under or fail to meet their obligations, including employee payments. However, in the most recent news from Bloomberg, FDIC has indicated that all depositors will get back their funds up to $250,000.
Since the news came out, the USDC/USDT pair experienced a significant drop in value on the Kraken exchange reaching a low of $0.869 at 07:16 UTC on March 11 2023. This drop is notable because it is lower than the pair ever got during the market stresses that followed the FTX debacle in November 2022.
The price of $USDC was $0.97 at the time of writing having recovered 3.39% in the last 24 hours during which it fell to as low as $0.88, significantly below its peg.
According to data from the company, Circle’s USD Coin is currently the second-largest stablecoin on the cryptocurrency market with $42 billion in circulation.
This news comes just as the market is still reeling from the collapse of the crypto-focused Silvergate Bank which had been catering to customers in the industry, having announced on March 8 2023 that it would be winding down its operations after also experiencing a run on its deposits.
_____________________________________
