•Circle, a stablecoin issuer, disclosed that around $3.3 billion of its $40 billion USDC reserves remained at Silicon Valley Bank (SVB) after the bank’s share price dropped precipitously in response to a run on deposits by nervous consumers.
•Silicon Valley Bank was shuttered by California banking regulators and a new bank, National Bank of Santa Clara, has been set up to hold all of SVB’s assets.
•USDC’s market capitalization decreased to $42.4 billion on Friday and de-pegged from the US dollar, raising concerns about its existing reserves.
The Collapse Of Silicon Valley Bank
Stablecoin issuer Circle disclosed late Friday that around $3.3 billion of its $40 billion USDC reserves remained at Silicon Valley Bank (SVB). This comes after the high-tech lender’s share price dropped precipitously in response to a run on deposits by nervous consumers.
Regulators Shut Down SVB
Silicon Valley Bank crumbled on Friday morning, sending shockwaves through the cryptocurrency and global markets, 48 hours after a capital crisis triggered the second-largest collapse of a US financial institution in history. According to data from CoinMarketCap, USDC’s market capitalization decreased to $42.4 billion on Friday. The USDC also de-pegged from $1, a hint of concern over its existing reserves.
Silicon Valley Bank has been shuttered by California banking regulators, who are now in charge of the lender’s deposits, a Friday press statement from the Federal Deposit Insurance Corporation shows. Based on reports, the FDIC has set up a new bank, the National Bank of Santa Clara, which will hold all of SVB’s assets. With around $209 billion in assets at the end of 2022, Santa Clara-based SVB was listed as the sixteenth largest bank in the United States.
Circle Responds To Concerns
In an effort to provide clarity on the problem, Circle reported on March 10 through Twitter that: “Following confirmation at end today that wires initiated Thursday were not yet processed…$3.3 billion remain at SVB.” In its most recent audit, Circle disclosed that as of January 31st , nearly 20% ($8 .6b) if it’s reserves were stored with various financial institutions including Silvergate and defunct SVB .
USDC Depegs From USD
Late this week , concerns grew concerning USDC . Friday evening in New York ,the price of USD Coin dropped below 1 USD for first time since launch . Although it recovered shortly afterwards , it served as evidence for some investors that stablecoins can lose their peg when there is disruption or lack confidence within their underlying infrastructure .
The collapse if Silicon valley bank impacted confidence surrounding USD Coin but circle responded quickly with information regarding remaining each held at this institution . It appears however ,that questions still remain concerning how stablecoins will react under similar scenarios going forward