Circle’s dollar-based stablecoin USDC has lost its dollar peg following the revelation that $3.3 billion in cash reserves are still held at failed Silicin Valley Bank.
According to Coinmarketcap, USDC traded at less than $0.88 – losing about 12% of its value following the news. Currently, USDC has regained some of its valley but still short of $1 at $0.94. The market cap is on the decline with volume high.
In a series of Tweets, Circle explained its situation, indicating they had initiated wires to remove funds from SVB, but they were not completed in time.
1/ 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 (@circle) March 11, 2023
Circle executive Dante Disparte said they are currently “protecting USDC from a black swan failure in the US banking system adding that the collapse of SVB will have broader implications for the US economy, alluding to a need for a federal bailout plan.
“We join the calls from policymakers, regulators, investors, businesses and, most of all, people who rely on a well-functioning U.S. banking system as a condition precedent of growing an economy. We will all be smarter on Monday,” stated Disparte.
While the bank regulators stepped in to take over SVB when the bank run kicked in, some are expressing their opinion it was too little, too late, calling for more federal action to backstop SVB – as well as the entire US banking system.
We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. 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 🛡️ (@coinbase) March 11, 2023
USDC’s main competitor Tether (USDT), appears to be unimpacted by the chaos – at least for now – jumping above the dollar peg as crypto holders swap USDC for USDT.