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Circle pledges to cover USDC shortfalls – Provides 1:1 reimbursement with USD


Circle pledges to cover USDC shortfalls – Provides 1:1 reimbursement with USD

Image source: Circle

USDC issuer Circle has pledged to cover any shortfall in the stablecoin’s reserves if it does not receive the full $3.3 billion held by Silicon Valley Bank today. today collapsed.

In a blog post Saturday, Circle said the company is prepared to cover any shortfall in USDC reserves resulting from its exposure to SVB using corporate resources, which could even involve external capital.

The announcement comes after it was revealed that Circle held $3.3 billion of its $40 billion in USDC reserves in an account with deposed lender Silicon Valley Bank.

In the blog post, the company detailed that it had made wire transfer requests on Thursday, but had not been completed by the end of Friday. “We have reason to believe that under applicable FDIC policy, transfers initiated prior to a bank’s receivership would otherwise have been processed normally,” the company added.

In other words, Circle expects the FDIC, which took over SVB on Friday, to allow trades initiated before the agency’s takeover to settle in the normal course.

The company further noted that USDC liquidity operations will resume as normal when banks open Monday morning in the United States. “In practice, our teams are well prepared to handle significant volume, based on the strong liquidity and reserve assets discussed below.”

Silicon Valley Bank, one of the most popular lenders to Silicon Valley tech and growth startups, filed for bankruptcy on March 10, falling into the hands of the Federal Deposit Insurance Corporation (FDIC). On Friday, the federal agency took control of the bank and created the National Deposit Insurance Bank of Santa Clara, which now holds SVB’s insured deposits.

USDC continues to remain strong

The USDC issuer also assured users that the stablecoin is still in good shape. Citing an audit by Deloitte, a leading analytics and auditing firm, Circle said it holds 77% of its reserves in treasury bills ranging from four weeks to 28 weeks.

These Treasuries are held at BNY Mellon and managed by BlackRock, the world’s largest asset manager. “U.S. Treasury bills are the most liquid assets in the world and are direct obligations of the U.S. government,” the company said.

The remaining 23% ($9.7 billion) of USDC’s reserves are in cash. The bulk of that tally, $5.4 billion, is held by BNY Mellon, one of the world’s largest and most stable financial institutions. Another $1 billion of USDC reserves are held at Customers Bank.

“USDC has no exposure to Silvergate; we had transferred limited reserves to support the settlement of transactions with USDC prior to the bank’s closure,” the company added.

According to an analysis by Hal Press, founder of digital asset investment platform North Rock Digital, USDC holders should be able to cash out their tokens for at least $0.93. “Overall, even if we assume that every bank they hold money in fails and returns in the worst case 70% of the money via the sale of USDC assets would still be worth 93c.”

Meanwhile, the USDC, which slipped to an all-time low of around $0.8774 on Saturday amid growing uncertainty, has since pared some losses. The stablecoin is currently trading above $0.95, up more than 4% in the past day.

Joanna Swanson

Joanna Swanson is Europe correspondent at the Thomson Reuters Foundation based in Brussels covering politics, culture, business, climate change, society, economies and inclusive tech. With specific focus in breaking news, she has covered some of the world's most significant stories.