Almost immediately after USD Coin (USDC) issuer Circle revealed that it was unable to withdraw $3.3 billion of its $40 billion reserves from Silicon Valley Bank (SVB), the resulting sale caused the stablecoin’s price to fall. below its parity of 1 dollar.
On March 9, Circle initiated a wire transfer to withdraw its funds from SVB, as the bank, insured by the Federal Deposit Insurance Corporation, was about to go out of business. However, two days later, on March 11, Circle confirmed that the transfers had not been fully processed, and that $3.3 billion of USDC reserves were still at SVB.
2/ Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the US economy and will follow guidance provided by state and Federal regulators.
—Circle (@circle) March 11, 2023
Like other clients and depositors who have relied on SVB for their banking services, Circle joins the calls for continuity of this important bank in the US economy and will follow the guidance provided by state and federal regulators.
Data from Cointelegraph Markets Pro and TradingView shows that USDC prices fell immediately after the disclosure, as shown below:
At the time of writing, the USDC had lost more than 10% of its value, trading at $0.8774. According to Dante Disparte, Circle’s director of strategy and head of global policy, SVB is critical to the US economy, warning that “its failure – without a federal bailout – will have broader implications for business, banking and the businessmen”.
Disparte further added:
“As with Silvergate, our teams have worked at full speed to limit any exposure to banks. This includes a wire transfer request made prior to the FDIC receivership of SVB. $3.3 billion of exposure remains in effective, but we follow state and federal regulatory guidelines.
On-chain data reveal In addition, Circle redeemed 1.4 billion USDC in 8 hours. To reduce exposure, cryptocurrency firms including Coinbase and Jump Trading redeemed approximately $850 million and $138 million worth of USDC, respectively.
Just two weeks ago, on February 23, USDC issuer Circle announced plans to increase its headcount by 25%, bucking the current layoff trend.
During the timeline, Circle’s CFO Jeremy Fox-Geen had shared his intention to go public, pending an improvement in market conditions. He added that the cryptocurrency sector needs more distance from the Terra and FTX implosions for public investors to reassess the future of digital asset companies.
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