USDC lost over 10% of its value, traded as low as $0.862. Circle executive warns of implications for business, banking, and entrepreneurs without a Federal rescue plan.
Circle, the stablecoin issuer, disclosed that $3.3 billion cash deposits were still with Silicon Valley Bank (SIVB) late on Friday. The bank was shut down earlier in the day by regulators following a run on deposits. This $3.3 billion represents around 8% of the total reserves that back Circle’s stablecoin, USDC.
Silicon Valley Bank was one of the six banking partners where Circle held part of the reserve assets that support its $40 billion USDC stablecoin.
USDC is the second largest stablecoin in the cryptocurrency market and a critical component of the crypto ecosystem. However, following the revelation by Circle, the issuer of USD Coin (USDC), that it was unable to withdraw $3.3 billion of its $40 billion reserves from Silicon Valley Bank (SVB), concerned investors swiftly redeemed their USDC tokens for cash on Friday. This caused a sell-off, resulting in the price of the stablecoin falling below its $1 peg.
Binance also suspended auto-conversion of USDC to BUSD, citing market conditions, as USDC plummeted by over 10%, trading at $0.86.
Circle redeemed $1.4 billion USDC within eight hours according to on-chain data. Crypto companies, including Coinbase and Jump Trading, also redeemed approximately $850 million and $138 million USDC, respectively to reduce their exposure.
A mere two weeks before this debacle, on February 23, Circle, the issuer of USDC, made a surprising announcement. The company revealed that it would be increasing its staff headcount by a whopping 25%, bucking the industry trend of layoffs.
During this same time, Circle’s CFO, Jeremy Fox-Geen, expressed the company’s intention to go public, as long as there was an improvement in market conditions. He added that the crypto industry needs more distance from the Terra and FTX implosions to encourage public investors to re-evaluate the future of digital asset businesses.