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On Friday (March 10), Californian regulators closed Silicon Valley Bank (SVB) — due to a capital crisis and a bank run — and placed it under the control of the US Federal Deposit Insurance Corporation (FDIC).
SVB has $175 billion in deposits, 89% of which is uninsured. According to a report by , the FDIC is “racing to find another bank over the weekend that is willing to merge with Silicon Valley Bank, according to people familiar with the matter who requested anonymity because the details are confidential.”
The first announcement by USD Coin (USDC) issuer Circle was that SVB was one of the six banks holding 25% of the cash reserves behind USDC.
Silicon Valley Bank is one of six banking partners Circle uses for managing the ~25% portion of USDC reserves held in cash. While we await clarity on how the FDIC receivership of SVB will impact its depositors, Circle & USDC continue to operate normally.https://t.co/NU82jnajjY
— Circle (@circle) March 10, 2023
Around three hours later, Circle said that $3.3 billion of USC’s $40 billion reserves are still at SVB, and presumably, the vast majority of these funds are uninsured:
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
Roughly 30 minutes later, COINBASE announced that it had decided to pause USDC-USD conversions over the weekend:
Your assets remain safe & available for on-chain sends.
— Coinbase (@coinbase) March 11, 2023
Within around four hours of Circle’s disclosure, on crypto exchange Bitstamp, USDC fell to as low as $0.8102:
The panic surrounding USDC seems to have helped much bigger rival USDT:
How many people had "Tether is a flight to safety trade" for their 2023 bingo cards? https://t.co/EWM1ln66Kz
— Lyn Alden (@LynAldenContact) March 11, 2023