Stablecoin USDC is breaking the greenback peg after the corporate introduced it has $3.Three billion in SVB publicity
Silicon Valley Bank logo at a location in San Francisco, California, USA on March 10, 2023.
Staff | Reuters
U.S. cryptocurrency firm Circle’s USD coin shed its dollar peg, falling to a record low on Saturday morning after the company announced it pegged nearly 8% of its $40 billion in reserves at collapsed lender Silicon Valley Bank.
USDC is known as a stablecoin, meaning that the value of the virtual currency is said to be pegged to a reference currency. USDC is set to trade at $1 but fell below 87 cents on Saturday, according to data from CoinDesk.
Regulators shut down the SVB on Friday and confiscated its deposits in what has become the biggest US bank meltdown since the 2008 financial crisis. The company’s spectacular implosion began late Wednesday when it surprised investors with the news that it had 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 with its technology clients.
In a tweet on Friday, Circle said it has $3.3 billion in reserves left at SVB. The company called for the bank’s continuity and said it will follow the guidance of regulators.
The cryptocurrency industry is still picking up pieces after the sudden collapse of FTX last year, and USDC’s break with the dollar could portend further troubles. Like banks, stablecoins are vulnerable to runs.
According to a California regulatory filing, SVB customers had withdrawn a staggering $42 billion in deposits by the end of Thursday. As of close of business that day, SVB had a negative cash balance of $958 million, according to the filing, and failed to raise sufficient collateral from other sources.
If USDC holders get scared or worry that there is not enough money in reserve, they could also sell or exchange their coins.
Circle did not immediately respond to requests for comment.