Once the issuer of USD Coin (USDC), Circle, disclosed that it was unable to withdraw $3.3 billion from its $40 billion deposits from Silicon Valley Bank (SVB), the subsequent sell-off triggered the price of the stablecoin to drop below its $1 peg almost immediately. On March 9, Circle began the process of removing its funds from SVB through the use of a wire transfer, as the bank was about to cease operations and was insured by the Federal Deposit Insurance Corporation.
Nevertheless, on March 11, 2019, Circle revealed that the wire transfers had not been fully processed and that $3.3 billion of USDC reserves were still held at SVB. According to data provided by CoinMarketCap, USDC prices dropped almost immediately after the news broke. At the time this article was written, the value of USDC had plummeted by more than 8%, and it was trading at $0.9126.
Broader Implications for the Overall Industry
SVB is essential to the economy of the United States, as stated by Dante Disparte, the chief strategy officer and head of global policy for Circle. He warned that the collapse of SVB, in the absence of a federal rescue plan, will have wider-reaching consequences for companies, financial institutions, and entrepreneurs.
Disparte further added: “As with Silvergate, our teams have worked at speed to limit any exposure to banks. This includes a wire transfer request made before SVB’s FDIC receivership. A $3.3 billion cash exposure remains — but we follow state and federal regulatory guidance.”
Moreover, on-chain data indicates that Circle redeemed $1.4 billion USDC in eight hours. Coinbase and Jump Trading, among others, redeemed around $850 million and $138 million USDC, respectively, to limit their risk. On the other hand, on February 23, the USDC issuer Circle revealed plans to raise its workforce by 25%, countering the current trend of layoffs.
During the period, Circle’s chief financial officer Jeremy Fox-Geen announced the company’s intention to go public if market conditions improved. He noted that the crypto market needs more time to recover from the Terra and FTX collapses before institutional investors can reassess the prospects of digital-assets companies.