Crypto investors have flocked to redeem their USD Coin (USDC) holdings after its issuer Circle revealed that it held $3.3 billion of its reserves with failed Silicon Valley Bank (SVB).
Concerns about USDC’s reserves arose after US regulators took control of the bank. The stablecoin issuer confirmed it had exposure to the institution, leading to massive withdrawals from the platform.
Circle said its attempt to remove its balances from SVB on March 9 was not processed before it was closed by authorities on March 10.
USDC’s market cap dropped $6 billion in 24 hours
USDC’s market cap has lost around $6 billion in the past 24 hours as crypto investors turn to rival stablecoins. According to BeInCrypto’s data, USDC’s market cap fell to $36.9 billion from $43.37 billion.
Blockchain analytics firm Peckshield tweeted that Circle burned 2.7 billion USDC within 24 hours. Nansen confirmed the report, adding that 70% of those burns were done within the last 8 hours.
A look at Curve’s 3pool dashboard shows that investors prefer USDT and DAI over USDC. According to the data, USDT accounts for 1.57% of the reserve, while DAI makes up 21.94%. The balance of 76.48% belongs to the USDC at press time.
USDC loses $1 peg
Meanwhile, concerns about the stablecoin’s reserves have led it to be pegged against its rivals. BeInCrypto data showed the stablecoin was up 10% on the news to $0.90 at press time.
Top crypto exchanges Binance and Coinbase said they would suspend USDC conversion, citing “market conditions.” Binance said The move was a “normal risk management procedural step to take.” Coinbase too suspended stablecoins conversion over the weekend. The US-based exchange plans to resume conversion on Monday when banks open.
Meanwhile, Circle’s chief strategy officer and head of global policy, Dante Disparte, said the issuer was trying to protect the stablecoin “against a black swan failure in the US banking system.” According to him, the main balance of USDC reserves are held in the Circle Reserve Fund – 80% short-term US Treasuries – and across other US banks.
Disparte added that “as with Silvergate, our teams have worked with speed to limit any exposure to banks. This includes a wire transfer request made prior to SVB’s FDIC receivership status. A liquidity exposure of $3.3 billion remains – but we are following state and federal regulatory guidelines.”
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Disclaimer
BeInCrypto has reached out to the company or person involved in the story for an official statement on the latest development, but has yet to hear back.