Circle’s efforts to maintain the USDC stablecoin have been thrown into chaos after Signature Bank, a key financial institution for the crypto industry, was forced to close its doors. On Sunday, New York state officials shuttered Signature due to the risk it posed to depositors, making it the third crypto-friendly bank to go bust in four days. Circle CEO Jeremy Allaire announced on Twitter that this meant the company could no longer mint or redeem USDC through Signature’s Signet product.
The closure of Signature has dealt a major blow to the crypto industry’s backend infrastructure, with Signet, a blockchain-based real time payments system, going offline. Circle, Coinbase, and various trading firms used Signet, and when contacted Sunday, Signet staff said they were unaware of what would happen to the product.
Allaire later added in another tweet that the company would be “bringing on a new transaction banking partner with automated minting and redemption possibly as early as tomorrow.” This news comes after Coinbase paused redemptions between USDC and U.S. dollars late Friday and said they would be resumed Monday.
USDC had temporarily lost its peg to the U.S. dollar on Friday, after SVB entered FDIC receivership, and Circle eventually revealed that $3.3 billion, or 8% of the funds backing USDC, were held in the bank. A Circle spokesperson later clarified that no USDC reserves were held with Signature Bank.
As of press time, USDC had gotten closer to regaining its peg to the dollar, trading at around $0.99.
UPDATE: (March 13, 2023 02:00 UTC): Updates with Circle comment in penultimate paragraph.)
