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Stablecoin USDC breaks dollar peg after firm reveals $3.3 billion in SVB exposure

TechTechnologyStablecoin USDC breaks dollar peg after firm reveals $3.3 billion in SVB exposure
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The logo of Silicon Valley Bank at a location on March 10, 2023 in San Francisco, California, US.

employee | reuters

US cryptocurrency firm Circle’s USD coin lost its dollar peg and fell to a record low on Saturday morning after the company revealed that about 8% of its $40 billion in reserves is tied up in reserves. Collapsed lender Silicon Valley Bank.

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USDC is known as a stablecoin, which means that the value of the virtual currency must be tied to a reference currency. According to data from CoinDesk, USDC is designed to trade at $1, but it fell below 87 cents on Saturday.

regulator Close SVB forfeited its deposits on Friday and what has become Biggest US Banking Failure since the 2008 financial crisis. The company’s spectacular explosion began late Wednesday when it surprised investors with news that it needed to raise $2.25 billion To shore up its balance sheet. What followed was the rapid collapse of a highly respected bank that had grown alongside its technology clients.

Circle said in a tweet on Friday that it has $3.3 billion in reserves left in SVB. The company called for the continuity of the bank and said it would follow the guidance of regulators.

The cryptocurrency industry is still picking up the pieces after The sudden collapse of FTX last year, and USDC breaking higher against the US Dollar could signal more trouble ahead. Stable coins, like banks, are vulnerable to moves.

SVB customers withdrew $42 billion in deposits by the end of Thursday, according to California regulatory filing, As of the end of trading that day, SVB had a negative cash balance of $958 million, according to the filing, and had failed to obtain sufficient collateral from other sources.

If USDC holders become fearful or worry that there is not enough money in reserves, they may also rush to sell or exchange their coins.

Circle did not immediately respond to requests for comment.

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