After the bankruptcy of Silicon Valley Bank and was managed by the FDIC. Then Circle will hope to find a solution to protect 100% of customer assets.
How it affects USDC reserves
USDC is currently collateralized 77% ($32.4 billion) in U.S. Treasury Bills (with maturities of three months or less) and 23% ($9.7 billion) in cash held at multiple locations. different organizations.
With a cash amount of $ 9.7 billion, Circle is divided into 3 banks:
- Deposit $5.4 billion with BNY Mellon (one of the largest and most stable financial institutions in the world)
- Deposit $3.3 billion at Silicon Valley Bank
- Deposit 1 billion USD at Customers Bank.
After Silicon Valley Bank had a liquidity crisis, the FDIC ordered the closure and confiscation of SVB’s assets. The above $3.3 billion amount is temporarily inaccessible until March 13 for further notice. The news panicked the markets and caused the USDC price to crash as low as $0.87 USD.
Circle said that it sent a request to transfer money from SVB to other banking partners on March 9. Before the time the FDIC closed down and confiscated SVB’s assets.
Circle believes that FDIC’s current policy will allow transactions that have been requested before, prior to the FDIC’s closure of SVB, to be processed normally. But this has to wait for the direction of the FDIC to see if those transactions are done or not.
Solution from Circle
Under such circumstances, Circle will cover the shortfall by using company resources and external funding if needed.
But with Circle reopening the conversion of USDC to USD at a 1:1 ratio tomorrow (March 13), will there be a big bank run? When the deficit to mobilize up to 3.3 billion USD needs to be mobilized in such a short time.
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