Circle intends to use corporate funds to make up for the lack of liquidity in Silicon Valley Bank.

by Mar 12, 2023CryptoNews0 comments

When banks open on Monday morning in the United States, USDC liquidity operations will “resume as usual,” enabling 1:1 USDC redemption with the U. S. dollar. Following Silicon Valley Bank’s closure, USD Coin issuer Circle announced on March 11 that it would use “corporate resources” to make up the shortfall in its reserves.

According to Circle, USDC liquidity operations will “resume as normal when banks open on Monday morning in the United States,” enabling USDC redemption at a rate of 1:1 with the U. S. dollar.

USD Coin to USD Chart
USD Coin to USD Chart

The announcement followed the stablecoin’s loss of its $1 peg on March 11, when it traded as low as $0.87 before gradually regaining its $1 peg, which it had reached by the time this article was published at $0.98. Following the disclosure of Circle’s $3.3 billion reserve at Silicon Valley Bank, the stablecoin lost its peg.

One of the largest lenders in the United States, Silicon Valley is a crucial player for venture-backed businesses. The California Department of Financial Protection and Innovation closed the bank on March 10, which increased worries about its future. As the receiver to safeguard insured deposits, the Federal Deposit Insurance Corporation was chosen.

Silicon Valley and Circle

According to the statement, Silicon Valley is “a venerable and trusted partner to the U.S. innovation economy,” which experienced a “classic bank run, much like those we saw during the financial crisis in 2008,” according to Circle. Few traditional banks have enough liquidity to withstand such a run. “.

With a market cap of over $42 billion as of January 31, USDC, the second-largest stablecoin, is collateral for numerous stablecoin ecosystems. According to a report from Cointelegraph earlier today, its depeg immediately impacted other stablecoin ecosystems.

Less than 72 hours after the collapse of the American tech bank, relief efforts were underway, according to Cointelegraph. According to Bob Elliot, chief investment officer at Unlimited Funds, “big banks actively working on buying svb business. ” The U. S. The Federal Deposit Insurance Corporation (FDIC) will cover 95% of uninsured deposits made to the acquirer, with 50% of those deposits paid out the following week. “.

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USDC is entirely backed by cash and U. According to Circle’s most recent audit report from January, U. S. Treasuries, with nearly $8.6 billion held by U.S. S. banks as of January: thirty-one, or about twenty percent of its reserves. The remaining $33 billion of its reserves are kept in U. S. Treasuries held in custody by BNY Mellon and managed by BlackRock through the Circle Reserve Fund. This government money market fund is registered. Big Four accounting firm Deloitte examined and approved the January report from Circle.

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