USD Coin (USDC) issuer Circle plans to use “corporate resources” to cover the shortfall on its reserves following Silicon Valley Bank’s (SVB) shutdown, the company said in a statement on March 11. According to Circle, USDC liquidity operations will “resume as normal when banks open on Monday morning in the United States,“ enabling USDC redemption at 1:1 with the U.S. dollar. The announcement came after the stablecoin lost its $1 peg on March 11 to trade as low as $0.87 before slowly repegging to $0.98 at the time of publication. The stablecoin lost its peg after the disclosure of $3.3 billion of Circle’s reserve held at Silicon Valley Bank.USD Coin price slowly recovers after depegging from the U.S. dollar. Source: CoinMarketCapSilicon Valley Bank is one of the biggest lenders in the United States and a major player in venture-backed companies. The bank was shut down on March 10 by the California Department of Financial Protection and Innovation, fueling fears about its future. The Federal Deposit Insurance Corporation was appointed as the receiver to protect insured deposits.Sharing an Update on USDC and Silicon Valley Bank. https://t.co/Ug3qpot8sJ— Jeremy Allaire (@jerallaire) March 11, 2023
In the statement, Circle asserted that SVB is “a venerable and trusted partner to the US innovation economy,” which suffered a “classic bank run, much like those we saw during the financial crisis in 2008. Few traditional banks have sufficient liquidity to withstand such a run.“SVB suffered significant losses which led to a situation where they were forced to sell long-duration assets to meet redemption demand. The settlement period on these assets caused a short-term liquidity crunch, leading to the FDIC stepping in to administer the bank yesterday. SVB’s fate is being decided this weekend by the FDIC and it’s our hope that they will find a solution that protects customers’ assets 100%.USDC is the second-biggest stablecoin, with a market cap of over $42 billion as of January 31, serving as collateral for many stablecoin ecosystems. As Cointelegraph reported, its depeg immediately affected other stablecoin ecosystems.Relief efforts were underway less than 72 hours after the collapse of the American tech bank. According to Bob Elliot, the chief investment officer of Unlimited Funds, “big banks actively working on buying svb business.“ The U.S. Federal Deposit Insurance Corporation will cover 95% of uninsured deposits to the acquirer and “50pct of uninsured paid out next week.“According to Circle’s latest audit report from January, USDC is 100% backed by cash and U.S. Treasurys, with nearly $8.6 billion held by U.S. banks as of Jan. 31, representing roughly 20% of its reserves. Another $33 billion of its reserves are held in U.S. Treasurys managed by BlackRock through the Circle Reserve Fund, registered as a government money market fund and held in custody by BNY Mellon. Big Four accounting firm Deloitte reviewed and certified Circle’s January report.