USDC stablecoin investors panicked when Circle announced its exposure to the shuttered banks, and Circle’s latest report on USDC Reserves and attestation from Deloitte, the global audit company, confirms the connection.
However, in a new development, Circle reports almost clearing all minting and redemption requests for USDC. The current situation shows the issuer has cleared all the backlog in transacting with the stablecoin.
Before its closure, SVB stated its plan to boost its balance sheet by raising about $2.25 billion. This was after its loss of $1.8 billion through asset sales. The bank opted for asset sales when its efforts to raise capital failed. But the entire situation became complicated as the sales resulted in a massive outflow of deposits.
Related Reading: Binance Discontinues Deposits, Withdrawals For UK Customers: Details
Subsequently, the California state financial regulators shut down the bank on March 10, seizing its deposits. The closure of SVB is associated with a bank run leading to a capital crisis that marked the second-largest implosion of a financial firm in the US.
The revelation of Circle’s exposure to the tune of over $3 billion to Silicon Valley Bank pushed USDC off its peg to the US dollar. Subsequently, the stablecoin de-pegged from its dollar value and even hit a record low on Saturday.
In its statement, Circle revealed it held 8% of USDC reserves of $40 billion at Silicon Valley Bank. This means that about $3.3 billion of the stablecoin reserves were trapped in the defunct bank.
After the announcement, USDC lost its $1 peg value by dropping to $0.87. The announcement from Circle created a frenzy for USDC, as even crypto whales suffered huge losses while trying to withdraw their funds.
Circle’s Moves In Clearing USDC Minting And Redemption
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Author: Savannah Fortis
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