USD Coin is listed as the second largest “stable” currency in the world.
New York:
Allegedly “stable” cryptocurrency USDC fell sharply after the firm that created it, Circle, announced it held $3.3 billion in failed Silicon Valley Bank (SVB) and dropped its peg to the dollar .
Circle said late Friday it had failed to withdraw its reserves from the SVB, whose sudden collapse rocked financial markets.
The Federal Deposit Insurance Corporation on Friday acquired SVB, a major lender to the tech world, in the second largest bank failure in US history.
The SVB is expected to reopen under a new name on Monday, with billions of dollars in customer deposits now under the control of the FDIC.
The FDIC guarantees deposits — but only up to $250,000 per customer, per bank.
The agency said Friday it would issue certificates to customers with uninsured funds — those over the $250,000 limit — so they would be the first to receive funds, which would eventually be returned while the bank is in receivership.
But the process of liquidating the bank’s assets can be lengthy, with no certainty as to how much will be recovered.
The USD coin, or USDC, was launched in 2018 as a “stablecoin,” meaning it was indexed to a central bank-backed currency, in this case the US dollar.
Measured by its circulation volume (around 40 billion US dollars), it is listed as the second largest “stable” currency in the world after Tether.
Stablecoins are said to be backed by equivalent reserves in readily available assets, either cash or easily convertible financial instruments.
Overnight Friday to Saturday, USDC fell to its lowest level ever, falling to 87 cents before recovering to around 94 cents.
Other stablecoins have also suffered.
Dai, the fourth-largest stablecoin by volume in circulation, fell to 95 cents, while Frax (sixth-largest) fell to 94 cents, its lowest level ever.
Cryptocurrency exchange platform Coinbase announced that it is suspending USDC-dollar conversions until Monday due to its exceptionally high activity.
More than $25 billion in USDC was exchanged on the Coinbase platform in 24 hours, a massive volume compared to the total holdings.
Meanwhile, Binance, the largest cryptocurrency transaction site, said it is suspending conversions from USDC to BUSD — Binance USD, the platform’s own “stable” currency.
“Like other customers and depositors who have relied on SVB for banking services, Circle joins this important bank’s calls for continuity in the U.S. economy and will follow the direction of state and federal regulators,” Circle said in a statement .
SVB payout orders hit a staggering $42 billion in a single day on Thursday, according to the California Department of Financial Protection and Innovation.
When the bank failed to comply with all of these requests, the FDIC stepped in to take control.
(Except for the headline, this story was not edited by NDTV staff and was published by a syndicated feed.)
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