• Circle disclosed that around $3.3 billion of its USDC reserves remain at Silicon Valley Bank after the lender’s share price dropped precipitously.
• The second-largest collapse of a US financial institution in history triggered the capital crisis and caused Silicon Valley Bank to be shuttered by California banking regulators.
• Regulators created a new bank, the National Bank of Santa Clara, which will hold all of SVB’s assets and has set up a new bank to address the issue.
What Happened to Silicon Valley Bank?
Silicon Valley Bank (SVB) crumbled on Friday morning, sending shockwaves through the cryptocurrency and global markets, 48 hours after a capital crisis triggered the second-largest collapse of a US financial institution in history. With around $209 billion in assets at the end of 2022, Santa Clara-based SVB was listed as the sixteenth largest bank in the United States.
Circle Discloses USDC Reserves Remain At SVB
Stablecoin issuer Circle disclosed late Friday that around $3.3 billion of its $40 billion USDC reserves remained at Silicon Valley Bank. This comes after the high-tech lender’s share price dropped precipitously in response to a run on deposits by nervous consumers. With a total supply of $43.5 billion, all of which is backed by government bonds and cash equivalents, USDC is the second largest stablecoin in circulation according to data from CoinMarketCap. In an effort to provide clarity on the problem, Circle reported through Twitter that: “$3.3 billion of ~$40 billion USDC reserves remain at SVB”.
USDC Depegs From USD After SVB Collapse
USDC’s market capitalization decreased to $42.4 billion on Friday and de-pegged from $1 due to concerns over existing reserves following SVB’s collapse and closure by California banking regulators who have setup a new bank – The National Bank Of Santa Clara – which will hold all of SVB’s assets..
Regulators Shut Down Silicon Valley Bank
A press statement from Federal Deposit Insurance Corporation (FDIC) shows that regulators have closed down Silicon Valley Bank as they are now in charge if it’s deposits .
Conclusion
It remains uncertain how long it will take for normalcy to resume with regards to Circle’s operations but what we can be certain about is that this event has highlighted just how fragile traditional banking systems are compared with cryptocurrency solutions such as stablecoins like USDC which offer more secure measures for protecting investor funds..