Circle, a Blockchain payment technology firm and issuer of USD Coin (USDC), revealed on March 10 that the transfers initiated on Thursday to take away the balances have still not been processed, leaving $3.3 billion of its USDC reserves at Silicon Valley Bank (SVB) out of its total $40 billion holdings.
This week, there has been an increase in worries about USDC due to Circle’s most recent audit revealing that on January 31, it had $8.6 billion of its reserves (which is around 20%) held at various financial establishments, including the now-bankrupt Silvergate and closed SVB.
Circle attempted to be open about the issue by releasing a statement on Twitter on March 10 that said:
“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 announced that it is joining other customers and depositors in advocating for the preservation of SVB, which it claims is crucial for the U.S. economy. On Twitter, Circle declared that it will abide by instructions given by state and federal authorities.
In addition to what Circle said, their chief strategy officer and head of global policy expressed that they were safeguarding USDC from a potential banking system collapse in the U.S., asking for the FDIC to provide assistance similar to SVB’s rescue plan.
Without a Federal rescue plan – will have broader implications for business, banking and entrepreneurs.
Before the announcement, USDC was trading slightly lower than its $1-peg, according to CoinGecko data. However, after the announcement was made, the price has decreased considerably and is currently at $0.93.
California’s financial regulator shut down Silicon Valley Bank, a major bank for venture-backed companies, making it the first FDIC-insured bank to close its doors in 2023.
The cause of the closure is uncertain, but the California regulator opted to put the FDIC in charge in order to guard insured deposits. SVB, one of America’s top 20 banks by asset size, had been offering financial services to various crypto-based venture companies such as Andreessen Horowitz and Sequoia.
Coinbase and Binance pause USDC conversions
Coinbase declared that it will be preventing exchanges between USDC and USD for the duration of the weekend, due to banks being closed, shortly after Circle released their statement concerning USDC issues.
“During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.”
– Coinbase
Centralized crypto businesses are finding it hard to adapt now that Silvergate is no longer providing them with all-day banking solutions.
“We temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion. This is a normal risk-management procedural step to take while we monitor the situation.”
– Binance
