In a series of events that have rocked the cryptocurrency industry, Circle Internet Financial’s $3.3 billion cash reserves problem appears to have been resolved. The Federal Deposit Insurance Corporation (FDIC) promised to make depositors of failed Silicon Valley Bank whole in short order. However, Circle’s USDC stablecoin is still facing challenges, as another critical financial institution to the crypto industry, Signature Bank, has just gone up in smoke.
On Sunday, New York state officials shuttered Signature Bank “in order to protect depositors,” making it the third crypto-friendly bank to go dark in four days. This has left Circle’s CEO, Jeremy Allaire, acknowledging on Twitter that the company can no longer mint or redeem USDC through Signature’s Signet product.
Update thread on USDC
We were heartened to see the US government and financial regulators take crucial steps to mitigate risks extending from the fractional banking system.
100% of deposits from SVB are secure and will be available at banking open tomorrow.
— Jeremy Allaire (@jerallaire) March 12, 2023
Despite this, Allaire remains optimistic and believes that USDC reserves are still safe and secure. In a tweet, he stated that “100% of deposits from SVB are secure and will be available at banking open tomorrow. 100% of USDC reserves are also safe and secure, and we will complete our transfer for remaining SVB cash to BNY Mellon.”
Allaire added that liquidity operations for USDC would resume at banking open the following morning, with settlements now being processed through BNY Mellon instead of Signature’s Signet. He also confirmed that a new transaction banking partner would be brought on board with automated minting and redemption, potentially as soon as the following day.
In light of the events of the past few weeks, Allaire emphasized Circle’s commitment to building robust and automated USDC settlement and reserve operations with the highest quality and transparency. He also noted that a much longer thread would be coming with reflections on all of the past weeks’ events.
USDC lost its peg to the U.S. dollar on Friday, hours after SVB entered FDIC receivership, amid uncertainty about how much of its funds were actually held in the bank. Circle eventually revealed that $3.3 billion, or about 8% of the funds backing USDC, were held at SVB. As of press time, USDC had gotten closer to regaining its peg to the dollar, trading at around $0.99.
These recent events have highlighted the fragility of the cryptocurrency industry and the importance of having a robust and transparent regulatory framework in place to protect consumers and investors. While Circle’s USDC stablecoin may have weathered this storm, it remains to be seen what further challenges lie ahead for the cryptocurrency industry.
Read more:
- Why Did Silicon Valley Bank Collapse Within Just 48 Hours?
- USDC Recovers To $0.96 After Circle Burns $649.3 Million In Tokens
- Circle (USDC) Is Expected To Successfully Face This Redemption Next Week, Experts Say