On Friday, the prominent Silicon Valley Bank, which served as the go-to bank for venture capitalists and startups, got shuttered down by the California Department of Financial Protection. Although not as concerning as the Silvergate crisis for the crypto community, many were taken aback to learn that Circle — the issuer of the USDC stablecoin — had an undisclosed exposure to the troubled bank.
USDC’s Exposure Significant?
According to the reserves reported on Circle’s official website, the company has around $8.67 billion of cash placed at regulated banks to support the value of USDC. These banking partners include noteworthy institutions such as BNY Mellon, Signature Bank, Citizens Trust Bank, Customers Bank, New York Community Bank, Silvergate and the now-defunct Silicon Valley Bank.
Circle’s annual report released in 2022, stated that approximately 80% of the stablecoin reserves consisted of three-month U.S. Treasury bills. The remaining 20%, however, remained in cash, which is held by each of the eight banking partners regulated by the United States. Moreover, the report mentioned Deloitte to be its official auditor and the company has already received its first certification report.
Although it’s certain Circle has a part of its $8.67 bn USDC reserves in the bank, an official number has still not been provided.
Circle’s Subsequent Banking Woes
Circle announced last week that it had severed relations with Silvergate Bank — crypto’s once favored banking partner — before the firm ceased operations and announced that it would voluntarily liquidate its assets this week. Coinbase, one of USDC’s initial founding partners, also cut ties with the bank and chose Signature Bank as a replacement.
However, due to the news of SVB’s closure, Signature Bank’s stock dropped by 22% and has since been halted from further trading. At the time of writing, USDC’s price remained pegged to its one-dollar value at a $43 billion market cap.
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