12 March 2023 10:11, UTC
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After depegging yesterday, USD Coin (USDC) rallied back to as high as $0.98 following news that its issuer Circle promised to cover any shortfall in its reserves amid the Silicon Valley Bank (SVB) crisis.
According to BeInCrypto data, USDC almost regained its $1 peg following Circle’s promise but has retraced to $0.95 as of press time. The stablecoin had lost over $6 billion of its supply on March 11 as investors feared it could crash.
However, the recent news from its issuer has returned some confidence in the asset, with its supply rising by around $2 billion to $38.7 billion at the time of press.
USD Coin USDC Price Chart by BeInCrypto
Circle Says it Would Cover Shortfall
In a March 11 statement, Circle said USDC would remain redeemable 1:1 against the U.S. dollar. It added that its liquidity operations would resume when banks open on March 13.
“As a practical matter, our teams are well prepared to handle significant volume, built on the strong liquidity and reserve assets.”
The stablecoin issuer explained that USDC’s issue was caused by a bank run on SVB. SVB was one of the many institutions that held part of USDC’s $9.7 billion cash collateral. BeInCrypto reported that the bank had $3.3 billion of this cash.
However, Circle remains confident that the wire transfer initiated on March 9 will be processed when banks resume on Monday. The crypto firm said it has “reason to believe that under applicable FDIC policy, transfers started prior to a bank entering receivership would have otherwise been processed normally.”
Meanwhile, Circle noted that in a situation where SVB cannot process 100% of the funds, it would stand behind USDC and “cover any shortfall using corporate resources, involving external capital if necessary.”
Voyager USDC Holdings Down $20M
Meanwhile, bankrupt crypto lender Voyager Digital has been liquidating some of its assets and consolidating the funds in USDC. According to Arkham Intelligence, the company lost around $45 million due to the depeg.
Source: Arkham Intelligence
Even with the increase in its price overnight, Voyager is still down $27 million on its USDC to dollar value.
DAI stablecoin issuer MakerDAO issued an emergency proposal to mitigate the risks to the protocol. This is because it possessed several collaterals that were exposed to USDC tail risk.
The issuer currently holds over $3 billion USDC used as a reserve for its DAI stablecoin.
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