By Solomon Odunayo
Circle, the platform responsible for issuing the USD Coin (or USDC), has recently disclosed that nearly $3.3B of its cumulative USDC reserves (nearly $40B) is still left at Silicon Valley Bank. This is witnessed after a drop in the share price of the high-tech lending entity. The respective price decline was the result of a run on the reluctant users’ deposits.
Circle Reveals that $3.3B Worth of Its USDC Reserves Has Not Been Extracted from Silicon Valley Bank
On Friday, Silicon Valley crumbled, and a huge impact was witnessed by the worldwide crypto markets. This took place just 48 hours following the start of a capital crisis, the 2nd-biggest crash of a US-based financial entity in history.
The cumulative supply of the USDC stablecoin is nearly $43.5 billion. Government bonds, as well as cash equivalents, support the stablecoin. USDC is considered to be the 2nd-biggest stablecoin in terms of circulation.
As per the data provided by CoinMarketCap, the market capitalization of USDC has experienced a slump to reach $42.4B recently. The token additionally got de-pegged from its $1 mark. This raises a lot of concerns over the present reserves of the token. California-based banking regulatory agencies have closed Silicon Valley Bank.
Hence, at present, they are administering the deposits of the lending institution, as mentioned in a press statement released on Friday by the Federal Deposit Insurance Corporation. As pointed out by the reports, a unique bank named the National Bank of Santa Clara has been established by the FDIC. The respective bank is established to keep the entirety of the assets connected to SVB.
With assets of up to $209B worth by 2022’s end, SVB has gathered a lot of attention as a prominent lending firm. It has been lending funds to a few of the biggest tech platforms. Silicon Valley Bank was listed as the 16th-biggest banking organization operating in the US jurisdiction. While endeavoring to offer clarity on the issue, Circle made a statement on the 10th of this month on its official Twitter channel.
The stablecoin issuer asserted that a valuation of approximately $3.3B of its USDC reserves is still kept at SVB. Circle, in the most recent audit, revealed that almost twenty percent ($8.6B) of the platform’s reserves were held by several financial entities as of the 31st of January. These companies take into account the defunct SVB and the latest insolvent Silvergate. As a consequence, most recently, several concerns were raised about the stablecoin.
USD Coin Gets Depegged from USD following SVB Crash
The price of USDC slumped to $0.9850 on Friday. Stablecoins like this are structured to maintain a parity of nearly 1:1 with having considerably liquid assets like the euro and the US dollar. The circulation of the USD Coin stablecoin is nearly $40 billion. This makes it 2nd only to the USDT stablecoin of Tether. The particulars of the quick dissolution of the bank are not so clear at present.
Nonetheless, the persistent interest rate spikes of the US Federal Reserve during the previous year seem to be among the chief causes of the banking organization’s closure. With these hikes, the financial conditions had gotten tightened in the start-up sector, where SVB has a significant place.
Top venture capital companies reportedly advised entities to redeem funds from the platform while reacting to the panic that was caused by the stock plunge of SVB.