Circle, one of the world’s largest stablecoins, has $3.3 billion in reserves trapped in Silicon Valley banks, and the token’s value has plummeted amid crypto market turmoil from the collapse of two US banks this week. said to be causing a decline in
The company’s USDC crypto token has lost its peg to the dollar following an announcement from Circle overnight on Friday.
US exchange Coinbase said it has temporarily suspended exchanges between USDC and US dollars. Rival exchange Binance also said it would suspend the automatic conversion of USDC to BUSD, the Binance-branded stablecoin.
Circle called for an emergency federal bailout plan for SVB.
Collapse of the SVB, the second largest The bank failures in U.S. history have begun to spread to customers, further hitting the crypto market, which is still recovering from last year’s crisis of confidence, and taking down many high-profile companies.
US bank Silvergate, which won a cryptocurrency client earlier this week, said: relax Operations following the execution of a deposit.
Stablecoins play a key role in bridging the traditional and crypto markets, with traders using them like cash and cryptocurrency dollars to transact. Most track the value of major currencies such as the dollar one-to-one. Stablecoin operators typically earn interest on the token’s underlying traditional asset, increasing revenue as circulation increases.
Circle’s USD Coin is the second largest stablecoin in the crypto market, with $42 billion in circulation, according to company data.
The company said it held six banking partners, including SVB, and a quarter of its USDC reserves in cash. Most of the $40 billion reserves are held in US Treasuries and other US banks.
In a blog post on Saturday, the Circle said USDC liquidity operations will resume when banks open on Monday. The company added that if SVB does not return 100% of the deposit, it will use the company’s resources, including external capital if necessary.
“It’s not just cryptocurrencies themselves that are under pressure. Currently, the banks that support the industry itself are failing. It’s a way in and out,” said Charlie Cooper, former chief of the Commodity Futures Trading Commission, a US regulator.
“A threat to even reserve forces [stablecoin] The model questions the feasibility of the intersection of cryptocurrencies and traditional finance,” he said.
Circle Chief Strategy Officer Dante Disparte warned on Saturday that the company is protecting stablecoins from a “black swan failure in the US banking system.”
“SVB is a critical bank to the US economy and without a federal bailout plan, its failure would have far-reaching implications for businesses, banks and entrepreneurs,” he tweeted.
Circle said it will continue to operate as normal pending clarification from U.S. regulators on how the SVB bankruptcy will affect its depositors Circle and USDC. Did not immediately respond to a request for comment.
According to industry price tracking website CoinMarketCap, USDC tokens have traded up to 88 cents per dollar since the SVB collapse.
Circle revealed it held cash with several US regulated financial institutions, including Silvergate and SVB.
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