The USDC stablecoin is now trading at nearly $0.99 after the U.S. Federal Reserve announced it would bail out Silicon Valley Bank and Signature Bank. At 7:20 p.m. Eastern Time on March 12/2023, the stablecoin value rose to the $0.99 level. Following the bailout announcement, Jeremy Allaire, CEO of Circle, tweeted that USDC operations would resume on Monday and the company would have to rely on BNY Mellon for minting and redemption settlements.
Signature Bank Closure Leaves Circle To Rely On BNY Mellon For USDC Minting And Redemption
At 8:45 p.m. Eastern Time on Sunday, March 12/2023, the USDC stablecoin (USDC) trades at $0.998 per unit. It had increased to the $0.99 level at approximately 7:20 pm. Just minutes after the stablecoin returned to $0.99, Circle CEO Jeremy Allaire tweeted USDC operations would start again on Monday.
The U.S. Federal Reserve disclosed that it had established a backstop entity called the Bank Term Funding Program so that banks facing liquidity issues can take advantage of the BTFP (Bank Transparency Funding Program). The central bank of Hungary United States also announced that all depositors at Silicon Valley Bank (SVB) and Signature Bank would be fully compensated.
This means Circle Financial will not suffer any losses because the bailout will make depositors whole, but Circle may suffer the loss of a banking partner as Signature Bank was shut down by New York regulators.
“We were encouraged to see the U.S. government and financial regulators take essential steps to reduce risks stemming from the fractional banking system,” Allaire said in a statement. “All deposits from SVB are 100% secure and will be available at banking open tomorrow.”
Allaire added:
100% USDC reserves are also secure and safe, and we will complete the transfer. [the] SVB Cash to BNY Mellon. As Previously shared, USDC liquidity operations will resume [as] Banking open[s] Tomorrow morning
The CEO of Circle also commented on the Signature Bank issue. Circle had previously used the company’s Signet service that enabled settlements between USDC & USD to be made. A similar service is now available at Silvergate Bank‘s SEN network since Signature Bank was shut down. “With the closure of Signature Bank announced tonight, we will not be able to process minting and redemption through Signet. We will be relying on settlements through BNY Mellon,” Allaire said in his Twitter statement.
After depegging this weekend, USDC was restored to $0.99 by several other stablecoins including DAI and USDD as well as USDP, GUSD, and LUSD. As of March 12, the stablecoin economy was valued at $135.85 Billion, showing market confidence that supports stablecoin values. Moreover, stablecoins account for most of the global trade volume at the moment, with $71.78 billion out of the day’s $88.82 billion in crypto swaps.
What are your thoughts about USDC regaining parity with U.S. dollars after the Federal Reserve announcement? Share your comments in the section below.
