Crypto Shaken as Silicon Valley Bank Risk Depegs 2nd-Largest Stablecoin
The fallout from the failure of Silicon Valley Bank reached further into crypto, unhinging a key cog in the market that's meant to be among the safest digital assets in the space.
The second-largest stablecoin, USD Coin traded as low as 81.5 cents as investors digested the exposure of its issuer Circle Internet Financial Ltd. to Silicon Valley Bank, which had just collapsed in one of the largest failures in US banking history. Late Friday, after hours of silence, Circle disclosed that $3.3 billion of its roughly $40 billion stockpile of reserves was held with the failed bank.
On Saturday afternoon, Chief Executive Officer Jeremy Allaire provided additional detail on Circle's exposure to the bank, saying in a statement on the company's blog and in tweets that USDC was “100% collateralized with a combination of cash and US Treasuries” and would remain “redeemable 1 for 1” with the US dollar. USDC's price rallied on the statement, trading around 97 cents as of 3:45 pm in New York.
“Specifically, USDC is currently collateralized 77% ($32.4B) with US Treasury Bills (with a three month or less maturation period), and 23% ($9.7B) with cash held at a variety of institutions, of which SVB is only one,” according to the blog post. Circle's Treasuries are held in custody at BNY Mellon, and managed by BlackRock.
A majority of its cash reserves are held at BNY Mellon; Circle said it deposited $5.4 billion there in the last week. The stablecoin firm had previously disclosed that its cash reserves were held at six banks, including BNY Mellon and Silicon Valley Bank, but before Friday had not provided specific dollar amounts for the individual allocations.
USD Coin, or USDC, is an asset-backed stablecoin and a widely used plank of crypto
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