Almost immediately after USD Coin (USDC) issuer Circle revealed it was not able to withdraw $3.3 billion of its $40 billion from Silicon Valley Bank (SVB), the resultant sell-off caused the price of the stablecoin to fall below its $1 mark.
On March 9, Circle had initiated a wire transfer for the removal of its funds from SVB as the Federal Deposit Insurance Corporation-insured bank was about to shut operations. However, two days later, on March 11, Circle confirmed that the wire transfers were not completely processed and that $3.3 billion of the USDC reserves was still with SVB.
2/ Like other customers and depositors who relied on SVB for banking services, Circle joins calls for continuity of this important bank in the U.S. economy and will follow guidance provided by state and Federal regulators.
– Circle (@circle) March 11, 2023
Data from Cointelegraph Markets Pro and TradingView show that USDC prices fell down immediately after the revelation, as shown below.
USDC depegs from the US dollar. Source: CoinMarketCap
At the time of writing, USDC lost 3% of its value as it traded at $0.969. According to Dante Disparte, the chief strategy officer and head of global policy for Circle, SVB is critical to the US economy and warned that “its failure – without a Federal rescue plan – will have broader implications for business, banking and entrepreneurs,” adding:
“As with Silvergate, our teams have worked at speed to limit any exposure to banks. This includes a wire transfer request made before SVB’s FDIC receivership. A $3.3 billion cash exposure remains – but we follow state and Federal regulatory guidance.”
On-chain data further reveals that Circle redeemed a net of $1.4 billion in USDC in the span of 8 hours. In an effort to reduce exposure, crypto companies including Coinbase and Jump Trading redeemed approximately $850 million and upto $138 million in USDC.
Related: Breaking: Circle discloses $3.3B tied up at Silicon Valley Bank
Just two week ago, on Feb. 23, USDC issuer Circle announced plans to increase its staff headcount by 25% – going against the ongoing layoff trend.
During the timeline, Circle’s chief financial officer Jeremy Fox-Geen had shared their intent to go public but planned on waiting for better market conditions. He added that the crypto industry needs more distance from the Terra and FTX implosions for public-market investors to re-evaluate the future of digital-assets businesses.