Circle’s USDC, the second-largest stablecoin with a market capitalization of $43b, has been hit by the collapse of Silicon Valley Bank (SVB).

On Friday, regulators in California placed the bank under receivership, leaving investors needing clarification on the return of their deposits. As a result, the value of USDC fell below its intended $1 peg, trading as low as 81.5 cents on Mar. 11.

Stablecoin de-pegs

USDC is designed to maintain a constant value of $1, fully backed by cash and cash equivalents, including short-dated Treasuries. However, the exposure of Circle Internet Financial Ltd., the issuer of USDC, to SVB has caused the stablecoin to de-peg. On Saturday, it traded as low as 81.5 cents, while smaller stablecoins like DAI and Pax Dollar also fell from their pegs, signaling broader crypto market apprehension.

According to Circle’s January reserve report, the company had $9.88b of its money stashed at regulated institutions to back up USDC. The financial institutions that kept USDC for Circle include Bank of New York Mellon, Citizens Trust Bank, Consumers Bank, New York Community Bank, Signature Bank, Silicon Valley Bank, and Silvergate Bank.

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Author: Julius Mutunkei

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