USD Coin (USDC), one of the most trusted stablecoins in the cryptocurrency market, has lost its peg to the US dollar, falling to record lows on Saturday.
Circle, the firm that created the USDC stablecoin, attempted to calm investor and holder fears it could restore the cryptocurrency’s peg.
Despite this, the coin remains exposed to Silicon Valley Bank, which collapsed on Saturday. Roughly $3.3 billion out of $40 billion in Silicon Valley Bank’s USDC reserves are Circle reserves.
According to Circle, it will resume USDC liquidity operation on Monday after banks reopen in the United States.
It said in a blog post: “As a regulated payment token, USDC will remain redeemable 1 for 1 with the U.S. Dollar.”
The coin lost its 1:1 peg to the USD, nosediving up to $0.88 on Saturday around 07:50 UT, Trading View data revealed.
It explained further, stating,
“As of Thursday, we had initiated transfers of these funds to other banking partners. Though these transfers had not yet been settled as of close of business Friday, we remain confident in the FDIC’s management of the SVB situation and stand ready to receive these funds.”
It concluded that USDC had “zero exposure to Silvergate,” referring to Silvergate Bank, which also collapsed last week after ceasing operations. The bank had facilitated payments for now-defunct cryptocurrency platform FTX in November, despite the latter collapsing days later.
Circle also noted it does not return 100 percent of customer deposits, but would use its corporate resources and external capital to cover shortfalls.
Jeremy Allaire, Co-founder & CEO of Circle, said in a series of tweets on Sunday,
“We were heartened to see the US government and financial regulators take crucial steps to mitigate risks extending from the fractional banking system. 100% of deposits from SVB are secure and will be available at banking open tomorrow.”
He added that he would publish a longer thread with “reflections on all of the past [week’s] events.” Allaire continued that Circle had “long advocated for full-reserve digital currency banking” to insulate the firm’s “base lay of internet money and payment systems from fractional reserve banking risk.”
The bank’s collapse is the largest US Bank since the financial crisis of 2008, news reports revealed.
