Stablecoin issuer Circle provided the latest updates on the state of USDC and Silicon Valley Bank.
On the morning of March 12, the CEO Jeremy Allaire of Circle – the company behind stablecoin USDC – gave the latest announcement about USDC’s volatility yesterday and the direction of the upcoming resolution.
Circle said that while USDC is a 24/7 cryptocurrency, the assets backing it are held in traditional banking and financial institutions, limited by regulatory hours. provisions of the law.
Converting USDC back to USD will resume normally on Monday morning (US time), when the US banking system reopens, with the rate remaining at 1 USDC for 1 USD.
Sharing an Update on USDC and Silicon Valley Bank. https://t.co/Ug3qpot8sJ
— Jeremy Allaire (@jerallaire) March 11, 2023
As for collateral assets, USDC is backed by $32.4 billion in short-term US Treasury bonds (1-3 month term) and $9.7 billion in cash stored at many banks. BNY Mellon Bank is the custodian for that amount of bonds, and the custodian is BlackRock Asset Management Group, well-known names in the US financial industry. Circle commits to the other bonds with high liquidity and guaranteed value by the US Government.
Meanwhile, $9.7 billion in cash is being held in three banks, including $5.4 billion at BNY Mellon, $3.3 billion at Silicon Valley Bank and $1 billion at Customers Bank.
After Silicon Valley Bank had liquidity difficulties, and was ordered by the United States Federal Deposit Insurance Corporation (FDIC) to close and confiscate assets on March 10, the amount of $ 3.3 billion on temporary inaccessible until Monday (March 13). This amount is equivalent to 7.83% of the total collateral for the stablecoin.
Circle revealed that it had sent a request to transfer money from Silicon Valley Bank to other banking partners on Thursday (March 9), before the FDIC intervened, but still had to wait for the direction of the FDIC to handle the case. to see if transactions made prior to the FDIC takeover of Silicon Valley Bank were processed on Monday.
Circle also acknowledges the possibility that it may not be possible to get 100% of the money stuck on Silicon Valley Bank, thus stating that it will still fully support USDC by covering the shortfall with company assets or raised capital. from outside if necessary.
Stablecoin USDC price, after depeging to $0.87 on March 11, recovered to $0.96 thanks to reassuring statements from Circle. USDC’s capitalization in the last 24 hours has gone from $43.7 billion to $35.9 billion, before returning to $39.5 billion at press time.
Even so, even if Circle is able to regain its assets and recover to close to the $1 mark, the confidence of a portion of crypto projects and investors in the stablecoin has been severely damaged in the past few days. via. There is a lot of speculation that after Circle resumes USDC conversion to USD on Monday, the “bank run” targeting stablecoins will continue. If the company doesn’t find a way to raise $3.3 billion soon to cover its collateral shortfall, the ratio of the shortfall to stablecoin capitalization will only grow and threaten the sustainability of USDC.
REAL ANSWER: the depeg gets progressively worse as Circle users redeem for 1:1 USD
eg.
3.3/40b > 8% > $0.92 per USDC
3.3/30b > 11% > $0.89
3.3/20b > 16.5% > $0.835
3.3/10b > 33% > $0.67
3.3/3.3b > 100% > $0.00As people realise this risk, price took another dump. now $0.88
— Jackson Zeng (@im_jacksonzeng) March 11, 2023
Not to mention that the US banking industry is at risk of a wide-ranging crisis from the collapse of Silicon Valley Bank, creating a knock-on effect that affects other institutions that hold Circle’s money, so USDC stablecoin risks don’t just stop at Silicon Valley Bank.
Rumors are circulating on Monday that the FDIC will allow Silicon Valley Bank depositors to withdraw 50% of the funds in their accounts, with the remainder pending the agency’s liquidation and periodic payments in the future. next time
From a source I trust: @SVB_Financial depositors will get ~50% on Mon/Tues and the balance based on realized value over the next 3-6 months. If this proves true, I expect there will be bank runs beginning Monday am at a large number of non-SIB banks. No company will take even a… https://t.co/2BoqtCDKJt
— Bill Ackman (@BillAckman) March 11, 2023
Synthetic Kyptos
