The USD Coin (USDC) Circle issuer’s exposure to the US banking system is approaching $9 billion, according to its latest audit report from January. Circle’s reserves are held at various regulated financial institutions in the country, such as Silvergate, Silicon Valley Bank and Bank of New York Mellon (BNY).
According to the report, the amount held in cash by regulated US financial institutions was $8.6 billion as of January 31, representing approximately 20% of their reserves. Another $33.6 billion of Circle’s reserves are held in US Treasuries managed by BlackRock through the Circle Reserve Fund, registered as a government money market fund and with funds held by BNY Mellon.
It is unclear how much of Circle’s cash reserves were held by Silicon Valley Bank (SVB). Other banks that hold the company’s reserves are Citizens Trust Bank, Customers Bank, New York Community Bank, a division of Flagstar Bank, and Signature Bank. USDC is the second largest stablecoin, with a supply of $42 billion in circulation as of January 31.
Circle’s January report was reviewed and certified by Deloitte, one of the big four accounting firms. Cointelegraph did not immediately receive a response from Circle prior to the publication of this note.
SVB is one of the largest lenders in the United States and a major player for venture capital-backed companies. The bank was shut down on March 10 by the California Department of Financial Protection and Innovation, fueling fears about its future. The Federal Deposit Insurance Corporation (FDIC) was appointed trustee to protect insured deposits.
Dave Weisberger, CEO and co-founder of algorithmic trading platform CoinRoutes, told Cointelegraph that the “fodder for a broader contagion event is there,” and “the spark could be materializing,” putting many startups and technology companies in the country at risk, a critical sector for the “sustained growth of the American economy.”
Weisberger also noted:
“A good number of tech companies – startups but also big tech companies – are highly exposed to SVB. If the government doesn’t step in and actually carry out some kind of bailout, we should expect these companies to have a hard time paying their employees, as well as layoffs and possibly an increase in unemployment.
Earlier this week, Silvergate Capital Corporation revealed plans to shut down its crypto banking arm citing “recent industry and regulatory developments.” According to the company, the settlement plan included “full refund of all deposits.” Silvergate was a major crypto-fiat gateway network for financial institutions and a major onramp for cryptocurrency in the United States.
Circle denied having any current exposure to Silvergate. According to a March 4 statement, Circle transferred the “small percentage of USDC reserve deposits it held” to other banking partners.
Earlier, sources told Cointelegraph that US authorities are coordinating a regulatory crackdown on banks that provide services to crypto companies, using multiple agencies to discourage the relationship between traditional institutions and emerging industry.
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