On Saturday, March 11, 2023, Circle Financial provided an update on its stablecoin, USDC, and declared that the firm is prepared to handle any significant volume and that it would ‘stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.’
Circle Financial Reassures Stakeholders of USDC Stability Despite SVB Failure
Circle Financial, the issuer of the second-largest stablecoin by market capitalization, usd coin (USDC), released a public update on Saturday, emphasizing that the firm is ready to handle any significant volume. The company discussed the failure of Silicon Valley Bank (SVB) and also reassured the public about the USDC’s “strong liquidity and reserve assets.” On Monday, the stablecoin issuer declared, “USDC will remain redeemable 1-for-1 with the U.S. dollar.”
While usd coin (USDC) is a crypto asset that operates 24/7 on various blockchains, Circle emphasized that “issuance and redemption is constrained by the working hours of the U.S. banking system.” Circle’s stablecoin USDC dropped to a low of $0.877 per unit on Saturday, March 11, 2023, at 3:02 a.m. ET. Following the announcement from Circle, USDC rose 10% higher, and at 4:15 p.m., the stablecoin was trading for $0.971 per coin. In addition to USDC, five other stablecoin assets deviated from their $1 parity on Saturday.
Circle said that while $3.3 billion in USDC cash reserves are held at SVB, the company initiated transfers of the funds to other banks, and it remains “confident in the FDIC’s management of the SVB situation and stands ready to receive these funds.” The stablecoin issuer further noted that it has “reason to believe that, under applicable FDIC policy, transfers initiated prior to a bank entering receivership would have otherwise been processed normally.” Circle continued:
In other words, the FDIC should allow transactions to settle in the ordinary course through the end of a bank’s standard daily processing cycle until the FDIC takes control of the failed institution.
Nevertheless, Circle addressed a negative scenario where SVB may not become whole, and the company’s return may take time. Circle reaffirmed that if that were to happen, it would still stand behind the stablecoin it issues. “In such a case, Circle, as required by law under stored-value money transmission regulation, will stand behind [USDC] and cover any shortfall using corporate resources, involving external capital if necessary,” the company’s update declares.
What do you think about Saturday’s stablecoin volatility and Circle’s recent update? Share your opinion in the comments section below.
