March 10, Blockchain Payment Technology Company and USDC, Issuer Circle confirmed that a wire transfer initiated on Thursday to remove the balance has yet to be processed, with $3.3 billion of its $40 billion in USDC reserves remaining at Silicon Valley Bank (SVB).
Concerns about USDC intensified later in the week, as Circle disclosed in its latest audit that as of Jan. 31, $8.6 billion, or about 20 percent of its reserves, were held by several financial institutions, including Recently bankrupt Silvergate and now - closed SVB.
In an effort to provide transparency on the matter, Circle disclosed via Twitter on March 10: “$3.3 billion of the approximately $40 billion in USDC reserves remain with SVB after confirming at the end of the day that the wire transfer initiated on Thursday to remove the balance has not been processed.” Circle said it is now joining other customers and savers in calling for the continuity of SVB, which the company says is important to the U.S. economy. Circle said on Twitter that it would follow guidance provided by state and federal regulators.
In Circle’s statement, the company’s chief strategy officer and head of global policy emphasized that “Circle is currently protecting USDC from a black swan failure of the U.S. banking system” as he called on the FDIC to create a SVB bailout (Federal Deposit Insurance Corporation). deposit insurance company): In a statement to Cointelegraph, a Circle spokesperson also highlighted that SVB is “one of six banking partners that Circle uses to manage approximately 25% of USDC’s cash reserves. While we wait to see how SVB’s FDIC takeover will affect Circle and USDC continue to operate as normal without its depositors.”
Notably, prior to the announcement, USDC was trading below its $1 peg at $0.98, according to CoinGecko; however, shortly thereafter, the price dropped sharply to $0.93 at the time of writing. It follows news that Silicon Valley Bank a major financial institution backing venture capital firms, was shut down by California financial regulators making it the first FDIC-insured bank to fail in 2023.
Although the exact reason for the closure is unclear, California regulators designated the FDIC as the recipient to protect the insured deposits. SVB one of the 20 largest U.S. banks provides financial services to several venture capital firms focused on cryptocurrencies, including Andreessen Horowitz and Sequoia Capital.
About 30 minutes after Circle’s latest statement, Coinbase added to the USDC-related issues by announcing it was “temporarily suspending USDC: USD conversions during weekend bank closures.” "During the period of high activity, the switch relied on U.S. dollar transfers cleared from banks during normal banking hours. When banks open on Monday, we plan to restart the switch," the company said. The move highlights the difficulties faced by centralized crypto firms, as Silvergate no longer provides them with 24/7 banking services.
On the same day, Binance also announced via Twitter that the cryptocurrency exchange "temporarily halted the automatic conversion of USDC to BUSD due to current market conditions, particularly related to high inflows and increased burden of supporting conversions." "This is a step in our normal risk management procedures as we monitor the situation," the company added.
