USDC stablecoin drops to $0.91 after SVB bank was hit…details here
The second-largest bank collapse in American history occurred on Friday, with market participants worried about crypto firms that might be caught up in the contagion surrounding Silicon Valley Bank (SVB).
The impact of the USDC stablecoin:
USDC, the second largest stablecoin issued by Circle, has lost its peg to the dollar across several exchanges.
At the time of writing, the coin is trading at around $0.91, according to coinmarketcap data.
However, it is important to note that Circle has stated that the company continues to operate as usual, despite the fact that 25% of its cash reserves are in SVB, estimated at around $3.3 billion.
Is USDC custodian Circle in trouble?
A report said that as of January, Circle’s cash reserves are linked to US-regulated financial institutions including a bank:
New York Mellon, Citizens Trust, customers Bank, New York Community Bank, Flagstar Bank, and Signature Bank.
The report claimed that around $9.88 billion was held across all of these institutions, although the updated figure on Circle’s transparency page claimed that number had risen to $11.4 billion.
This is about 26.3% of Circle’s reserves and the remainder is held in US Treasuries.
Circle’s total reserves of $42.3 billion were only about 0.1% higher than its outstanding currency debt, which was $42.2 billion.
As of March 10 at 22:00 US time, the USDC stablecoin has a market cap of $42.8 billion, down $900 million in just four hours, according to CoinGecko.
At the time of writing, Circle has not released a statement specifying exactly what part of its reserves it holds with each identified banking partner.
But Circle has already announced BNY Melon as the primary custodian of USDC reserves 12 months ago.
It also indicated that a small part of its reserves is held in Silvergate, the latter having declared bankruptcy in the past few days.
Currently, after the collapse of SVB, it seems that market participants are dumping USDC and DAI (DAI is a backed stablecoin largely made up of USDC reserves) and opting for the USDT stablecoin.
In the recent Silicon Valley bank crisis, Changpeng Zhao, CEO of Binance, also confirmed that his company Binance is not exposed to this bank.
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