Circle ($USDC) Has Over $3B Tied Up At Silicon Valley…

The issuer of the second-largest stablecoin Circle has stated that it held an undisclosed portion of its $9.8 billion cash reserves at the failed Silicon Valley Bank as of 17th January 2023. 

Circle Still Has $3.3 Billion Held Up At SVB 

According to Circle’s latest attestation, the US-based stablecoin issuer holds a part of the USDC’s cash reserves at Silicon Valley Bank. USDC has a circulating supply of around $43 billion, fully backed by government bonds and cash-like assets. According to the company’s January reserve report, the firm held nearly $10 billion in cash at various regulated banks to shore up USDC’s value. On 10th March, cash deposits in its reserves stood at $11.1 billion, according to its website. 

USDC’s banking partners included Silicon Valley Bank, Citizens Trust Bank, Bank of New York Mellon, Customers Bank, New York Community Bank, Signature Bank, and Silvergate Bank. Circle also holds a part of its reserves in a dedicated BlackRock fund. 

USDC Concerns 

Concerns around USDC have been growing recently after it emerged in Circle’s latest audit that as of 31st January 2023, $8.6 billion, around 20% of its reserves, were held up at various financial institutions. These include the recently bankrupt Silvergate and now shuttered Silicon Valley Bank. However, Circle had stated last week that it had cut all ties with Silvergate bank. 

In an attempt to assuage fears and provide transparency, Circle stated that it had initiated wire transfers on Thursday to remove balances from SVB. However, these were not yet processed, leaving around $3.3 billion of its reserves stuck at the bank. Circle tweeted, stating, 

“Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB.”

USDC Conversions Paused 

Piling on further misery on Circle, shortly after the USDC issuer’s announcement, Coinbase stated that it is temporarily pausing USDC:USD conversions over the weekend. The exchange released a statement on Twitter, stating, 

“We are temporarily pausing USDC:USD conversions over the weekend while banks are closed. During periods of heightened activity, conversions rely on USD transfers from the banks that clear during normal banking hours. When banks open on Monday, we plan to re-commence conversions.”

A little later, Binance also stated that it was temporarily suspending the conversion of USDC to BUSD due to “ongoing market conditions” related to high inflows and difficulty in supporting the conversion. However, the exchange called it a routine risk management step. 

“Binance has temporarily suspended auto-conversion of USDC to BUSD due to current market conditions, specifically related to high inflows & the increasing burden to support the conversion. This is a normal risk-management procedural step to take while we monitor the situation.”

Clamor For Continuity Grows 

Circle also joined calls by other depositors and customers of SVB for the bank’s continuity, stating that it is important for the larger U.S. economy. The firm also stated that it would be following the guidance provided by state and federal regulators. 

“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 the guidance provided by state and Federal regulators.”

Further adding to this statement, Circle’s Chief Strategy Officer and head of global policy, Dante Disparte, stated, 

“@circle is currently protecting #USDC from a black swan failure in the U.S. banking system. @SVB_Financial is a critical bank in the U.S. economy, and its failure – without a Federal rescue plan – will have broader implications for business, banking, and entrepreneurs. We join the calls from policymakers, regulators, investors, businesses, and, most of all, people who rely on a well-functioning U.S. banking system as a condition precedent of a growing economy.”

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.