USDC, one of the most popular stablecoins, has experienced a significant depeg as it lost over 10% of its value, trading at $0.9175 at the time of writing.
This came after Circle, the issuer of USDC, revealed that it could not withdraw $3.3 billion of its $40 billion reserves from Silicon Valley Bank (SVB). The resulting sell-off caused the stablecoin to fall below its $1 peg.
Circle had initiated a wire transfer to remove its funds from SVB as the bank was about to shut operations, but two days later, Circle confirmed that the wire transfers were not wholly processed, and $3.3 billion of USDC reserves still remain with SVB. This news caused USDC prices to fall immediately after the revelation.
2/ Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow guidance provided by state and Federal regulators.
— Circle (@circle) March 11, 2023
Dante Disparte, the chief strategy officer and head of global policy for Circle, warned that SVB’s failure without a federal rescue plan will have broader implications for business, banking, and entrepreneurs. He added that Circle has worked to limit any exposure to banks, but a $3.3 billion cash exposure remains.
In an effort to reduce their exposure, crypto companies, including Coinbase and Jump Trading, redeemed approximately $850 million and $138 million USDC, respectively. On-chain data further reveals that Circle redeemed $1.4 billion USDC in 8 hours.
This news comes just two weeks after USDC issuer Circle announced plans to increase its staff headcount by 25%.
Circle’s CFO, Jeremy Fox-Geen, had also shared its intent to go public pending an improvement in market conditions, adding that the crypto industry needs more distance from the Terra and FTX implosions for public investors to re-evaluate the future of digital-assets businesses.
The USDC depeg is a reminder of the importance of regulatory guidance and oversight in the crypto industry. It remains to be seen how this incident will impact the stablecoin market and Circle’s plans to go public.
