Circle, the company behind USDC, the second-largest stablecoin in circulation, recently confirmed that its cash reserves worth $3.3 billion(alleged 9.8 billion from Deloitte audit ) have been stuck with Silicon Valley Bank (SVB), which was taken over by regulators and shut down in March 2023.
Circle has been providing regular updates about its reserves, which are meant to back the USDC’s value. However, the company disclosed that its holdings with SVB have been frozen and that it is working to resolve the situation.
The below are series of events did take place in the last 12 hours that was covered by us:
- Coinbase pauses USDC to USD for the weekend – Puts investors in worry
- Binance has temporarily suspended auto-conversion of USDC to BUSD – Potentially due to Circle-Silicon Valley Bank exposure
- Circle’s USDC Stablecoin’s Cash Reserves at Failed Silicon Valley Bank
Depegging of USDC
Since the news, investors confidence are going down and Circle is working to get the situation in control :
As a result of the frozen reserves, the USDC has “depegged” from its intended value of $1, with the token trading at a slight discount of $0.92 at the time of writing(EST timezone). This is not the first time that USDC has experienced such an issue, as it previously suffered a similar depegging incident in late 2020.
The recent situation has once again raised concerns about the risks associated with stablecoins, which are often touted as a safer alternative to traditional cryptocurrencies due to their pegged value to fiat currency. Critics argue that stablecoins are not as secure as they are made out to be, as they rely on the underlying assets that are held as collateral.
Circle has stated that it is committed to resolving the issue and ensuring the USDC returns to its intended value. The company has also emphasized that it has a diversified reserve portfolio, with funds held in various banks and other investments, in addition to its USDC holdings.Some stablecoins are backed by a combination of cash and other assets, others may not be fully collateralized or may have unclear asset backing, raising concerns about the safety of these tokens.
As the use of stablecoins continues to grow in popularity, it is likely that regulators will focus more attention on these assets and their associated risks. In the meantime, Circle’s efforts to resolve the situation with SVB will be closely watched by the crypto community, with many hoping for a positive outcome that could bolster the credibility and stability of the USDC and other stablecoins.
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