Circle Says it will Cover Shortfalls with Corporate Assets
- Circle stated that the USDC stablecoin will remain redeemable 1 for 1 US dollar.
- The company added that it will cover any shortfalls with its own corporate resources and seek outside help if needed.
- Circle has around $3.3B in the SVB, which it tried to withdraw on Thursday, but the transaction did not go through as the SVB collapsed on Friday.
- USDC went as low as $0.88, and Circle is “hopeful” that the FDIC will seek a purchaser for SVB that will “ensure all depositors are made whole.”
While the crypto community did not fully recover from the shock and effects provided by the collapse of the prominent crypto bank, Silvergate Bank, the collapse of the prominent US bank, Silicon Valley Bank (SVB), blew the wound wide open. Multiple crypto firms have exposure to the bank, and one of them is Circle, the company behind the popular stablecoin USDC, which is also the second-largest stablecoin by market capitalization.
Shortly after the collapse of the Silicon Valley Bank and its closure by the California Department of Financial Protection (DFPI), the Federal Deposit Insurance Corporation (FDIC) took over the bank, and it was revealed by Circle that it had an exposure of around $3.3 billion to the bank. The FDIC immediately created the Deposit Insurance National Bank of Santa Clara (DINB), which would be responsible for the operations at the bank.
In a blog post, Circle confirmed that it had a $3.3 billion exposure to Silicon Valley Bank. As reported earlier by BitcoinWisdom, following this announcement, the USDC stablecoin lost its peg to the US dollar. However, the company stated that the USDC stablecoin will remain redeemable 1 for 1 USD irrespective of the circumstances.
Circle also stated that it will cover all the financing from corporate resources and will seek outside help if necessary, but the USDC stablecoin will remain redeemable 1 for 1 USD. It is crucial to note that the stablecoin went as low as $0.88, and Circle is “hopeful” that the FDIC will seek a purchaser for SVB that will “ensure all depositors are made whole.”
“We have reason to believe that under applicable FDIC policy, transfers initiated prior to a bank entering receivership would have otherwise been processed normally,” Circle said. “In other words, the FDIC should allow transactions to settle in the ordinary course through the end of a bank’s standard daily processing cycle until the FDIC takes control of the failed institution.”
Speaking of purchasers, Elon Musk, the CEO and founder of Tesla and SpaceX, and also the new owner of social media platform Twitter, said that he is open to the idea of purchasing the bank and turning it into a digital bank. On the other hand, the founder and CEO of Razer, an American-Singaporean multinational tech firm, Min-Liang Tan, also expressed his intentions of acquiring the bank and turning it into a digital one.
Circle tried to initiate transfers of its $3.3 billion SVB funds on Thursday, but the transactions did not go through as the bank collapsed on Friday. Interestingly, Circle deposited $5.4 billion of its USDC cash reserves with BNY Mellon, one of the largest and most stable financial institutions in the world, followed by another $1 billion of its cash reserves held at Customers Bank, and Circle has transaction and settlement accounts for USDC at Signature Bank.
Additionally, the co-founder of crypto exchange Huobi Global, Du Jun, also had exposure to SVB. He expressed his experience via a post on social media platform Twitter:
“[I] dodged, LUNA, dodged 3AC, even dodged FTX [and their collapse], but I couldn’t avoid Silvergate, nor SVB and USDC. Asked a few crypto veterans; losses amounted to >$1 billion in stock and deposits, myself included. I’m very upset, and it’s time to cut down on my budget.”
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
