Update on USDC
Jeremy Allaire, CEO of Circle, which issues the US dollar-linked stablecoin USDC, reported on the 13th the latest situation surrounding USDC. He explained that USDC’s reserves are 100% safe and that cash currently deposited at Silicon Valley Bank (SVB) will be transferred to BNY Mellon Bank.
Update thread on USDC
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.
— Jeremy Allaire (@jerallaire) March 12, 2023
The report comes after the US government announced an interim intervention to allow all SVB depositors access to its funds. Allaire said that deposits to SVB are 100% safe and will be available when the bank opens on the 13th.
According to Circle, SVB is one of six banking partners that manage about 25% of the cash holdings of the USDC reserve. Circle said about 440 billion yen ($3.3 billion) was left in SVB after wire transfers for withdrawals made on the 9th remained outstanding.
Due to this effect, USDC temporarily dropped to around $0.88, causing a dippeg with the US dollar. USDC price recovered sharply on the 13th, and as of writing this article is back to $0.99.
Source: CoinGecko
Allaire also mentioned the impact of the signature bank, which was suspended due to the bankruptcy of SVB. Circle said it will no longer be able to process USDC issuances and redemptions through its network of signature banks, and will instead rely on settlements through BNY Mellon Bank.
It also plans to partner with new transaction banking partners for automated USDC issuance and redemption as soon as possible in the next few days.
What is a stablecoin
A cryptocurrency whose price is always stable. Stablecoins are a type of cryptocurrency, and unlike BTC, ETH, and XRP, which have volatility, their purpose is to maintain their value ($1) backed by the US dollar. In addition to US dollar-backed stablecoins (USDT/USDC), there are also stablecoins that use algorithms.
▶️Cryptocurrency Glossary
USDC Reserve Status
On the 11th, Circle once again reported on the status of the USDC reserve on its official blog.
USDC will continue to be able to trade 1:1 with the US dollar, and Circle has built robust liquidity and reserve assets that will allow it to handle large trading volumes, he said.
USDC is 100% collateralized by cash and US Treasuries. Specifically, 77%, or about 4.3 trillion yen ($32.4 billion), is US Treasury bonds with a maturity of three months or less, and 23%, or about 1.3 trillion yen. ($9.7 billion) is collateralized by cash held at various financial institutions, including SVB.
U.S. Treasuries are custodians of BNY Mellon, with liquidity and asset management managed by BlackRock. In terms of cash, it has about 720 billion yen ($5.4 billion) deposited with BNY Mellon, and has begun the process of transferring about 440 billion yen ($3.3 billion) currently deposited with SVB to other banking partners. and
It also added that it has zero exposure to Silvergate Bank, which is set to be liquidated.
connection: U.S. cryptocurrency service provider Silvergate Capital announces liquidation of banking business
expert opinion
As of May 11, blockchain expert Andy Liang said there was comfort in the USDC situation.
Specifically, Circle holds about 80% of its reserves in highly liquid products, the existence of internal reserves and interest income, and the ratio of exposure to SVB in terms of total funds. Given its relatively small size and its partnership with Coinbase, he said it would be able to weather the risks.
