Uncertainty surrounds USDC’s billion dollar empire as issuer Circle held reserves with Silicon Valley Bank

As the startup world comes to terms with the shocking implosion of well-known financial institution Silicon Valley Bank, the fallout could spill over to the cryptocurrency world as well. On January 17, it was announced that one stablecoin in particular, USDC, held some of its share capital in SVB, funds that are now likely to run out of liquidity for several days.

When TechCrunch Circle, the USDC issuer, reached out for comment about the status of stablecoin reserves, a spokesperson said, “We are working on this internally and will update you when I have a response.” The company may have withdrawn money from the SVB before failing to do so on Thursday; It is also possible that the company has already withdrawn money from the bank since the last asset disclosure.

According to January’s Circle Attestation report, the company had deposited approximately $9.88 billion in cash with regulated banks, including to protect the value of its stablecoin. The bank’s allocations were not disclosed, but the funds were held with regulated financial institutions such as Bank of New York Mellon, Citizens Trust Bank, Customers Bank, New York Community Bank (a division of Flagstar Bank, NA), Signature Bank and, in Silicon Valley Bank and Silvergate Bank in particular.

If Circle had more than a handful of cash in SVB, it could raise concerns that USDC support is no longer complete and is instead below what a stablecoin would need.

Two banks named by the USDC, SVB and Silvergate, made headlines this week for different but similar reasons. SVB was taken over by regulators and closed on Friday after the bank announced Wednesday that it had raised $1.8 billion from sales of US Treasury bonds and mortgage-backed securities it had invested in due to price increases. its capital profile to increase its interest income has failed to maintain investor and client confidence in its health.

Silvergate, a cryptocurrency-friendly financial institution, said on Wednesday it was “voluntarily exiting the market and liquidating its banking division,” which some analysts say will spell trouble for the largest digital asset ecosystem.

Last week, however, Circle said it “transferred the small percentage of USDC reserve deposits held at Silvergate” to other banking partners. “This process of dissolving our relationship with Silvergate began last year as signs of trouble and broader exposure to crypto asset risk became more apparent.” This could limit the stablecoin’s potential exposure to unstable banking partners.

USDC is the second largest stablecoin by market capitalization with $43.5 billion in pending offerings and more than $6.3 billion in daily trading volume, up 92.33% in the past 24 hours, according to data from CoinMarketCap. At the time of writing, USDC was stable at the $1 level.

The stablecoin is pegged 1:1 to the US dollar and backed by reserves consisting of a mix of cash and short-dated US Treasuries. Of that circulating supply, approximately $11.4 billion in cash is held in reserve banks as of March 2, according to Circle. The site claims (Coinbase, which had a total of $2 billion USDC on its books at the end of Q4 in a mix of client and corporate funds, is down 8% in regular trading today).

It’s also worth noting that USDC was launched in 2018 by Circle and Coinbase, so it makes sense that Coinbase has a decent amount of money in store.

Source: La Neta Neta

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