Circle’s USDC, the second-largest stablecoin with a market capitalization of $43b, has been hit by the collapse of Silicon Valley Bank (SVB).
On Friday, regulators in California placed the bank under receivership, leaving investors needing clarification on the return of their deposits. As a result, the value of USDC fell below its intended $1 peg, trading as low as 81.5 cents on Mar. 11.
USDC is designed to maintain a constant value of $1, fully backed by cash and cash equivalents, including short-dated Treasuries. However, the exposure of Circle Internet Financial Ltd., the issuer of USDC, to SVB has caused the stablecoin to de-peg. On Saturday, it traded as low as 81.5 cents, while smaller stablecoins like DAI and Pax Dollar also fell from their pegs, signaling broader crypto market apprehension.
According to Circle’s January reserve report, the company had $9.88b of its money stashed at regulated institutions to back up USDC. The financial institutions that kept USDC for Circle include Bank of New York Mellon, Citizens Trust Bank, Consumers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank, and Silvergate Bank.
The collapse of Silicon Valley Bank has also raised concerns among regulators and other banking customers. Circle joined calls for the bank’s continuity in the U.S. economy and vowed to follow the guidance provided by state and federal regulators.
Circle’s $3.3b USDC reserve remains in limbo as regulators seized the bank leaving the USDC’s value to continue fluctuating, causing concern among the crypto community.
USDC is a crucial plank of crypto markets, and its fluctuation could have broader implications for the overall market. However, Tether, the top stablecoin, held at $1 despite facing scrutiny over its reserves in the past.
Circle redeems net $2b USDC amid market turmoil
USDC has a circulating supply of about 41 billion tokens and a roughly $37 billion market value. According to blockchain research firm Nansen, Circle redeemed a net $2 billion USDC in the past 24 hours.
According to data from CoinMarketCap, USDC plummeted as low as 81.5 cents. Crypto assets are mostly in red, with bitcoin (BTC) oscillating at around the $20,000 mark. Meanwhile, most altcoins are under pressure, with dogecoin (DOGE) and litecoin (LTC) noticeably printing double-digit losses.