Circle Shares an Update on SVB and USDC After SVB Collapse

Circle— a crypto firm, provided a recent update on USDC— a stablecoin, and Silicon Valley Bank (SVB), on March 11th, Saturday. It stated that USDC liquidity operations will resume normally after Monday morning when banks open in the United States. Practically, Circle’s team is well prepared to handle significant volume. Circle built on the strong liquidity and reserve assets which they have added in their update.

Circle’s USDC and SVB Update

USDC is a regulated payment token and will remain redeemable 1:1 with the U.S. Dollar, Circle said. As on March 10th, Friday, Silicon Valley Bank suffered a classic bank run that was similar to the financial crisis in 2008. Circle mentioned SVB as a venerable and trusted partner to the US innovation economy.

SVB suffered significant losses that led to a situation where they were forced to sell long-duration assets to meet redemption demand. During the settlement period, these assets were affected with a short-term liquidity crunch and led to the Federal Deposit Insurance Corporation (FDIC), a US government corporation, stepping in to administer the bank on Friday.

Circle states that the FDIC may decide the fate of SVB this weekend while the crypto firm hopes that they’ll find a solution that fully protects customers’ assets.

Impact on USDC Reserves

Notably, USDC is completely collateralized with a combination of cash and US Treasuries. At present, USDC is collateralized 77% ($32.4B) with US Treasury Bills (with a 3 month or less maturation period), and 23% ($9.7B) with cash held at a variety of institutions, of which SVB is only one.

However, US Treasury Bills are the most liquid assets in the world and are direct obligations of the U.S. government. These reserves are held in custody by BNY Mellon, a corporate banking investment company. Active liquidity and asset management is managed by BlackRock, an investment management firm.

Last week, Circle took action to reduce bank risk and deposited $5.4bn with BNY Mellon. $3.3bn of USDC’s cash reserves remain with SVB. As of Thursday, the crypto firm initiated transfers of these funds to other banking partners. Though these transfers had not yet been settled as of close of business on Friday. Still, Circle remains confident in the FDIC’s management of the SVB situation and is ready to receive these funds.

Additionally, $1bn of the USDC reserves is held with the Customers Bank as the industry looks to expand their transaction settlement options, and Circle maintains transaction and settlement accounts for USDC with Signature Bank. Both are important banks to the crypto industry.

USDC has zero exposure to Silvergate, which also collapsed. Circle transferred out what were limited reserves to support transaction settlement with USDC prior to bank closure.

Circle is hopeful that the FDIC as receiver will seek a rapid purchase and assumption of a franchise as strong as SVB’s to ensure all depositors are made whole.

Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing