USDC Depegs as Circle Confirms $3.3B Stuck

USDC Depegs as Circle Confirms $3.3B Stuck

written by John Murphy | March 11, 2023

Circle, the company behind stablecoin USDC, has confirmed that $3.3 billion in USDC is stuck with Silicon Valley Bank. This has led to USDC de-pegging from its one-to-one peg with the U.S.U.S. dollar on several exchanges.

According to Circle CEO Jeremy Allaire, the issue is due to regulatory misunderstandings from Silicon Valley Bank, which led to the funds being frozen. Allaire is confident that the issue will be resolved, but there is currently no timeline for when the funds will be released.

The news has led to concerns over the stability of USDC, a popular stablecoin used by many cryptocurrency traders due to its close tracking of the U.S.U.S. dollar. The debugging has led to increased volatility for USDC, with some exchanges reporting significant drops in its value.

At the time of writing, USDC has lost more than 10% of its value, trading at $0.8774, and Circle executives see widespread repercussions for businesses, banks, and entrepreneurs in the absence of a government bailout. Increase. 

Almost immediately after the USD Coin USDC ticker below $0.91, The Issuer Circle announced that he could not withdraw $3.3 billion of his $40 billion reserves from Silicon Valley Bank.

On March 9, Circle initiated a wire transfer to withdraw funds from SVB as a Federal Deposit Insurance Corporation-insured bank was on the brink of bankruptcy. However, two days later, on March 11, the Circle confirmed that the transfer had not been fully processed, leaving $3.3 billion in USDC reserves in his SVB.  

At the time of writing, USDC is trading at $0.8774 and has lost more than 10% of its value. According to Dante Disparte, Circle’s chief strategy officer and head of global policy, the SVB is critical of the U.S.U.S. economy, saying,

“Without the government’s rescue plan, its failures will hurt businesses, banks, and entrepreneurs.

On-chain data also shows that Circle has cashed out 1.4 billion USDC in 8 hours. To mitigate the risk, cryptocurrency companies such as Coinbase and Jump Trading have cashed about $850 million and USD 138 million, respectively.  

Two weeks ago, on February 23, the USDC Issuer Circle announced plans to increase headcount by 25%, bucking the ongoing layoff trend.  

In the timeline, Circle’s chief financial officer, Jeremy Fox-Geen, communicated the company’s intention to go public until market conditions improve. He added that the crypto industry needs to distance itself from the implosion of Terra and FTX in order to allow retail investors to reassess the future of digital asset trading. 

Circle has stated that it will work with regulators to resolve the issue, but it is unclear how long this process will take. In the meantime, traders and investors using USDC are advised to exercise caution and to closely monitor its value on different exchanges.