Circle Internet Financial’s $3.3 billion cash reserve issue resolved on Sunday Federal regulators promised depositors of failed Silicon Valley bank Will be completed in short order. But Circle’s USDC stablecoin is not out of danger.
This is because Signature Bank is another important financial institution for the crypto industry in general and USDC in particular. just went up in smoke, On Sunday, New York state officials shut down Signature “to protect depositors,” making it the third crypto-friendly bank to go dark in four days. Circle CEO Jeremy Allaire acknowledged on Twitter This means the company can no longer mine or redeem USDC through Signature’s Signet product.
The sudden failure of Signature leaves a vital part of the crypto industry’s backend infrastructure in limbo: Signet. It is a blockchain-based real-time payment system that is supposed to work 24/7. Circle, Coinbase and many crypto trading firms used Signet. But with the death of the signature, the signet has become useless.
When contacted on Sunday, Signet employees said they were in the dark about what would happen to Signet, but expected more information soon.
allaire said in another tweet that the company will “bring on a new transaction banking partner with automated mining and redemptions as soon as tomorrow.”
The fate of Signet could prove crucial for Coinbase as well. In its third-quarter shareholder letter, Coinbase — another major company for USDC — said it had joined Signet to allow real-time payments and settlements. “Users can now add USDC to the Web3 ecosystem in as little as 10 minutes,” the company said in the letter. A Coinbase spokesperson did not immediately respond to a request for comment.
late friday coinbase stopped redemptions between the US dollar and USDC and said they would reopen on Monday, when normal banking hours would resume.
USDC lost its peg against the US dollar on Friday, hours after SVB entered FDIC receivership, amid uncertainty over how much of its funds were actually held at the bank. Circle eventually said it held $3.3 billion, or about 8% of the funds backing USDC, in SVB.
A Circle spokesperson said in an email to CoinDesk that Circle does not have any USDC reserves with Signature Bank.
As of press time, USDC was close to regaining its peg to the dollar, trading at around $0.99.
UPDATE: (March 13, 2023 02:00 UTC): Update with circle comment in penultimate paragraph.)
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