Stablecoin USDC breaks dollar peg after revealing US$3.3 billion Silicon Valley Bank exposure
LONDON: Stablecoin USD Coin (USDC) lost its dollar peg and slumped to an all-time low on Saturday (Mar 11) after Circle, the United States firm behind the coin, revealed that some of the reserves backing it were held at Silicon Valley Bank.Circle has US$3.3 billion of its US$40 billion of USDC reserves at collapsed lender Silicon Valley Bank, the company said in a tweet on Friday.The coin broke its 1:1 dollar peg and fell as low as US$0.88 shortly after 0800 GMT on Saturday according to market tracker CoinGecko.
It recovered slightly to trade around US$0.90 by 1120 GMT.Silicon Valley Bank collapsed on Friday in the largest US bank failure since the 2008 financial crisis, roiling global markets and stranding billions of dollars belonging to companies and investors.Circle said in a tweet on Friday that the company and USDC "continue to operate normally" while the firm waits for clarity on what will happen to Silicon Valley Bank depositors.Meanwhile, US crypto exchange Coinbase said in a tweet it was not allowing USDC to be exchanged for US dollars over the weekend while banks are closed, citing "heightened activity", while it plans to resume swaps on Monday.Circle did not immediately respond to a request for comment about the dollar peg, sent outside of US working hours.Joseph Edwards, investment advisor at Enigma Securities, said the situation was "extremely serious" for USDC."No matter how sound Circle's operations are, this sort of depeg on a stablecoin tends to fundamentally undermine confidence in it," Edwards said."The short-term implications here are dramatic and unknowable, especially once systems start to have to be adjusted to the reality that 1 USDC isn't trading at 1 USD for the time being."Stablecoins are
