Stablecoin USDC falls below $1, faces $3.3 billion exposure to Silicon Valley Bank

USDC, a stablecoin that is supposed to trade one-to-one against U.S. dollars, has fallen below $1 on Saturday, after creator Circle said it had over $3.3 billion held at Silicon Valley Bank, which collapsed on Friday.

USDC traded at as low as 86 cents on a dollar early Saturday, before it rebounded to around 95 cents, according to CoinDesk data.

The USDC reserves tied up at Silicon Vally Bank amounts to about 8% of its $40 billion total reserves, according to Circle.

Crypto exchange Coinbase said Friday it is temporarily suspending the conversion between stablecoin USDC and USD over the weekend. USDC
which is co-supported by Coinbase

and Circle, is the world’s second-largest stablecoin. 

Coinbase said it would resume the conversions between USDC and USD on Monday. “During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours,” the company tweeted Friday. 

“Your assets remain safe & available for on-chain sends,” Coinbase added. 

Amid concerns over contagion in the banking system from the collapse of Silicon Valley Bank, investors cashed out more than $2.6 billion USDC in the 24 hours as of 3 am Saturday, according to data from CryptoQuant. 

While most of the USDC reserves are invested in Treasuries, close to $9 billion of them were held in cash at banks including Bank of New York Mellon BK, Citizens Trust Bank, Customers Bank, New York Community Bank, a division of Flagstar Bank, N.A., Signature Bank SBNY, Silicon Valley Bank and Silvergate Bank SI as of Jan.31, according to an attestation report in March.

SVB Financial Group’s Silicon Valley Bank on Friday became the first major bank since the global financial crisis in 2008 to be taken over by the Federal Deposit Insurance Corp. in a sudden demise for a once-mighty lender to technology companies in its namesake region.

The Federal Deposit Insurance Corporation has taken over more than $175 billion in deposits at Silicon Valley Bank. FDIC’s standard insurance covers up to $250,000 per depositor, per insured bank, for each account ownership category.

The rest of the depositors are uninsured — they will be paid an advance dividend within the next week and get receivership certificates for their balances, FDIC said. Whether and how much depositors with over $250,000 would get their money back, depends on the amount of money FDIC receives from selling Silicon Valley Bank’s assets. 

Representatives at Circle and Coinbase didn’t respond to requests seeking comment.