As soon as the banks open Monday morning in the United States, Circle promises to be able to reimburse USDC at parity with the dollar. Let’s take stock of this announcement, as well as what will happen to the $3.3 billion blocked at Silicon Valley Bank (SVB).
Circle will redeem one USDC for one dollar starting Monday
Last night, Circle officially communicated on the next events awaiting its USDC stablecoin. Thus, from Monday when the banks open, the company will cover reimbursements at a 1:1 ratio with the dollar :
“USDC liquidity operations will resume as normal when banks open Monday morning in the United States. In practice, our teams are well prepared to manage a large volume […]. As a regulated payment token, USDC will remain redeemable 1 to 1 with the US dollar. »
Although the USDC has not yet regained its peg to the dollar, this announcement has breathed a boost of confidence among investors, stabilizing the price of the stablecoin at least, if not returning to its normal course. According to data sources, it is currently hovering between $0.94 and $0.96 :
USDC Price on CoinMarketCap
In addition, Circle returned to the details of its reserves: 77% of the USDC’s capitalization is backed by US Treasury Bonds with a maturity of three months or less. The remaining 23% is cash held at various banking institutions, involving $5.4 billion at Bank of New York Mellon (BNY Mellon), as well as the famous 3.3 billion held by Silicon Valley Bank (SVB) :
The remaining 23% ($9.7bn) is in cash. Last week, we took action to reduce bank risk and deposited $5.4bn with BNY Mellon, one of the largest and most stable financial institutions in the world, known for the strength of their balance sheet and as a custodian.
$3.3bn of USDC’s… https://t.co/Bm1rZaTEPK
— Jeremy Allaire (@jerallaire) March 11, 2023
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What will happen to cash blocked at SVB?
For the $3.3 billion in cash tied up at Silicon Valley Bank, Circle is considering several possibilities.
The first scenario is release of funds from Monday. Indeed, the withdrawal of cash was initiated before the California branch of the Federal Deposit Insurance Corporation (FDIC) ordered the receivership of SVB and these assets. According to the normal procedure, the transfer should thus take place normally.
Nevertheless, there is a chance that this 3.3 billion dollars will remain blocked. In this case, it is to be expected that the return of the assets will take time, given the administrative procedures that this will entail. In the meantime, the FDIC will issue an IOU to Circle for reimbursement. It is also not impossible that the amount involved may not be fully covered.
In the extreme case that this $3.3 billion is totally lost, Circle will cover the losses itselfeven if it means having to raise funds:
“In such an event, Circle, as required by law under the Stored-Value Money Transmission Regulations, will stand behind the USDC and cover any shortfall using company resources, involving external capital if necessary. »
If the USDC manages to fully recover from this ordeal, which, remember, has its origins in the banking sector, this will send a strong signal to the cryptocurrency ecosystem. To be able to draw conclusions, we will therefore have to wait for the opening of the American banks on Monday.
👉 Also in the news – Which players in the cryptocurrency ecosystem are affected by the fall of Silicon Valley Bank?
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Sources: Circle, CoinMarketCap
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I timidly discovered the world of blockchain at the end of 2018 during my quest for financial freedom. Initially invested moderately, it was only two years later that I took the gamble of betting everything on the movement that was taking shape then. I then dedicate 2021 to training myself better to acquire more knowledge and seriousness. As I often like to say: I still have a billion things to learn. And what I do know, I want to share with you.
Vincent Mayor
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