USDC issuer, Circle, has issued a statement updating investors on its cash reserves, which are currently stuck with Silicon Valley Bank (SVB). This follows the recent collapse of SVB, which has left the fate of USDC’s funds in question. Here are the key takeaways from the statement:
Possible shortfall and delays
Circle has revealed that it may not regain 100% of its funds held by SVB, and it could take some time to retrieve them. This is because the FDIC issues IOUs and advanced dividends to deposit holders, which could cause delays.
Assurance to customers
Despite the uncertainty, Circle has assured its customers that it will cover any shortfall caused by SVB’s collapse by pooling its corporate resources and seeking external capital if necessary. The company has disclosed that SVB holds $3.3 billion of USDC’s cash reserves, which make up a 25% portion of the USDC reserves held in cash.
Transfers of reserves
Circle is confident that its transfers of billions of dollars of reserves to other banks initiated before the bank entered receivership will be approved by the FDIC and processed usually. Most of USDC’s funds are held in U.S. Treasury Bills, which make up 77% or $32.4 billion of USDC reserves, and are currently in the custody of BNY Mellon.
Resumption of USDC liquidity operations
Circle has announced that USDC liquidity operations will resume as normal when banks open on Monday morning in the United States. USDC will remain redeemable one-for-one with the U.S. dollar. The announcement comes after USDC lost its peg shortly after SVB’s collapse and dropped to as low as $0.88, causing investor concerns.
SVB’s shutdown and Circle’s confidence
SVB is one of the biggest lenders in the United States and a significant player for venture-backed companies. Its shutdown on March 10th by the California Department of Financial Protection and Innovation has raised fears about its future. Despite the setback caused by SVB’s collapse, Circle has expressed its confidence in SVB’s status as a venerable and trusted partner to the U.S. innovation economy. It believes that SVB’s failure was due to a classic bank run, much like those seen during the financial crisis in 2008, and that few traditional banks have sufficient liquidity to withstand such a run.
Circle’s commitment to USDC investors
Despite the uncertainty caused by the situation, Circle’s commitment to covering any shortfall caused by the collapse of SVB is a reassuring sign for USDC investors. The stablecoin has become popular among tech firms and investors looking for a stable digital asset with a 1:1 peg to the U.S. dollar. The company’s willingness to use its resources to cover any shortfall demonstrates its commitment to the stability and integrity of the USDC stablecoin.
