On Saturday, March 11, 2023, Circle Financial updated the public about its stablecoin, USDC, and noted that the stablecoin’s liquidity operations will resume normally on Monday morning in the United States. Circle said that the company’s teams would be ready on Monday to “handle significant volume” and that the firm will “stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.”
Circle Financial Confident in USDC Stability Despite SVB Failure
Circle, the issuer of the second-largest stablecoin by market capitalization, usd coin (USDC), addressed the public on Saturday, noting that the firm will be ready on Monday to “handle significant volume.” The company discussed the failure of Silicon Valley Bank (SVB) and also emphasized the USDC’s “strong liquidity and reserve assets.” On Monday, the stablecoin issuer noted, “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 managed to rise 10% higher, and at 4:15 p.m., the stablecoin was swapping 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.
However, Circle does address a negative scenario where SVB may not become whole, and the company’s return may take time. Circle stressed 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 concludes.
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