World’s fifth-biggest cryptocurrency USDC’s value falls after Silicon Valley Bank connection revealed

USD Coin (USDC), a stablecoin abd world’s fifth-biggest cryptocurrency slumped to an all-time low on Saturday after it was revealed that Circle, the US-based firm operating the coin had invested $3.3 billion of its reserves in the now-collapsed Silicon Valley Bank (SVB). 

USDC is a stablecoin, meaning its price is pegged to a reserve asset and in this case, the US dollar. However, after the revelation, the stablecoin broke its 1:1 dollar peg and fell as low as $0.87, before recovering to $0.90 at the end of the day. 

According to a statement released by Circle, $3.3 billion of USDC’s $40 billion reserves are held at the SVB. 

“Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB,” the company said in a tweet. 

“Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow guidance provided by state and Federal regulators.”

Gavin Newsom, California governor, where SVB is headquartered, released a statement in the aftermath had said he was in communication with the White House and monitoring the situation. 

“Everyone is working with FDIC [Federal Deposit Insurance Corporation] to stabilize the situation as quickly as possible, to protect jobs, people’s livelihoods, and the entire innovation ecosystem that has served as a tent pole for our economy.”

Notably, SVB collapsed on Friday, a mere 48 hours after the bank’s announcement, which not only led to an aggressive decline in its stock resulting in a market loss of over $80 billion but also spurred panic among depositors and clients. 

It was the largest US bank failure since the 2008 financial crisis. The FDIC is now scurrying around to find another bank over the weekend that is willing to merge with SVB and stop the impending total collapse. 

(With inputs from agencies)