Don’t Panic: ‘Circle Will Stand Behind USDC and Cover Any Shortfall’
Finally some good news about USDC and the stablecoin’s future
Grey82/Shutterstock modified by Blockworks
Circle has issued a statement regarding USDC and the depegging of the stablecoin following the collapse of Silicon Valley Bank (SVB).
If 100% of the $3.3 billion that Circle held at SVB at the end of business on Friday is not returned, Circle promises that “as required by law under stored-value money transmission regulation, [we] will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
The USDC stablecoin has plunged to as low as $0.87 over the last 24 hours as fears of under-collateralization have infected the market. At the time of writing, USDC was once again nearing its peg, at $0.97 and on a path to parity.
Circle noted in the statement that they believe any transfers initiated prior to the bank entering receivership should be covered under FDIC policy, and they have previously stated that they initiated such a transfer on Thursday to recover the outstanding funds held at SVB.
They have also suggested that there is a possibility that transfer is processed on Monday.
Circle also claimed that the USDC stablecoin had no exposure to Silvergate, after the crypto-friendly bank entered voluntary liquidation proceedings.
According to the Circle statement, the company holds a total of $9.7 billion in cash, mostly with BNY Mellon. A further $1 billion is held at Customers Bank, and Circle does not specify the nature of its exposure to Signature Bank. The remaining 77% of its assets are described as being held in Treasury Bills.
Jeremy Allaire, CEO of Circle, projected confidence in a tweet thread this afternoon. “Tl;Dr: While USDC can be used 24/7/365 on chain, issuance and redemption is constrained by the working hours of the U.S. banking system. USDC liquidity operations will resume as normal when banks open on Monday morning in the United States. As a practical matter, our teams are well prepared to handle significant volume, built on the strong liquidity and reserve assets discussed below. As a regulated payment token, USDC will remain redeemable 1 for 1 with the U.S. Dollar.”
Some sources are already suggesting that SVB may not infect the wider banking system, with many of the available funds potentially available for redemption in the coming week.