Circle Internet Financial, the issuer of USDC stablecoin, has expressed concerns over the fate of its deposits at Silicon Valley Bank (SVB) after the California Department of Financial Protection and Innovation (DFPI) announced the bank’s closure due to liquidity and insolvency concerns. Circle revealed that SVB is one of the six banking partners responsible for managing one quarter of the assets backing its $43 billion stablecoin.
In a tweet on Friday, Circle stated, “While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally.” The company also provided a link to its transparency report, which outlines the reserves backing its USDC stablecoin, adding that the USDC stablecoin continues to operate normally.
Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally.https://t.co/NU82jnajjY
— Circle (@circle) March 10, 2023
The closure of SVB, which is a member of the Federal Reserve System with total assets of approximately $209 billion and total deposits of approximately $175.4 billion as of Dec. 31, 2022, has sent shockwaves through the financial industry. The bank was not only a significant partner to Circle but also counted a number of cryptocurrency entities as clients, especially hedge funds and VC firms.
Circle’s concern over its deposits at SVB is understandable as it may lead to a shortfall in the reserves backing its USDC stablecoin, which could affect the stablecoin’s peg to the US dollar. However, the company has reassured its customers that it will continue to operate normally while it awaits clarity from federal banking regulators.
The fate of Circle’s deposits at SVB is still uncertain, but the closure of the bank and the concerns raised by Circle have once again highlighted the need for greater regulatory oversight of the stablecoin market. While stablecoins offer a number of benefits, including fast transaction speeds and low fees, their lack of transparency and regulation has raised concerns about their impact on the financial system.
As the stablecoin market continues to grow, regulators are likely to take a closer look at the risks and potential threats posed by these digital assets. In the meantime, Circle and other stablecoin issuers will need to work closely with their banking partners to ensure that the reserves backing their stablecoins are secure and in compliance with regulatory requirements.
Read more:
- US Banking Industry In Crisis As Crypto-Friendly Bank Silvergate Goes Under And SVB Financial Scrambles For Funds
- BitMEX Co-Founder Draws Parallels Between 2008 Financial Crisis And The Current State Of The Banking System
- Silicon Valley Bank Shuttered By California Regulator Over Liquidity And Insolvency Concerns