USD Coin (USDC) Looses Dollar Peg After Circle’s Bank Partner Fails
Circle Internet Financial, the issuer of the USDC stablecoin, has reportedly seen $1 billion in net redemptions since Friday morning.
This follows the shutdown of one of its banking partners, Silicon Valley Bank (SVB).
According to blockchain transactions analyzed by crypto intelligence platform Nansen, Circle burned around $1.6 billion worth of USDC on Friday, effectively taking tokens out of circulation as investors redeemed dollars. The company also minted new USDC, but on a much smaller scale.
The loss of one of its banking partners has created concern over the stability of USDC, which is the second-largest stablecoin in the market after Tether’s USDT, and a crucial part of the crypto ecosystem.
USDC’s value is backed by U.S. government bonds and cash-like assets, including $11.1 billion in cash deposits across regulated banks.
The stablecoin’s market capitalization fell from $43.5 billion on Friday to $36.6 billion at present.
Despite the loss of SVB, a Circle spokesperson said that the firm and USDC continue to operate normally, and the shutdown of the bank’s operations has yet to impact its depositors.
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Circle said late Friday that $3.3 billion in cash deposits remained at Silicon Valley Bank (SIVB). This lender was shut down earlier in the day by regulators after suffering a run on deposits. The sum represents some 8% of the total reserves backing Circle’s stablecoin USDC.
1/ Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.
— Circle (@circle) March 11, 2023
“Circle is currently protecting USDC from a black swan failure in the U.S. banking system,” Dante Disparte, Circle’s chief strategy officer, tweeted late Friday.
@circle is currently protecting #USDC from a black swan failure in the U.S. banking system. @SVB_Financial is a critical bank in the U.S. economy and its failure – without a Federal rescue plan – will have broader implications for business, banking and entrepreneurs. https://t.co/CYi6Z26ngH
— Dante Disparte (@ddisparte) March 11, 2023
At the time of writing USDC is trading around $0.88 after reaching a bottom of $0.87 earlier today.
Andrey Kunev
Reporter at CoinsPress
Andrey Kunev is a knowledgeable cryptocurrency content creator passionate about the crypto market. With extensive experience in market analysis and investment reporting, Andrey is a valuable asset to the CoinsPress team. As a frequent contributor, he offers insightful and comprehensive coverage of market trends, price fluctuations, and new advancements in cryptocurrency. Whether you're a seasoned investor or just getting started, Andrey's clear and concise writing offers a comprehensive look at the current state of the crypto market and its prospects. Stay up-to-date with CoinsPress's expert analysis and commentary on all things cryptocurrency.
