Circle, the issuer of the stablecoin USDC, has issued a statement regarding the recent situation with Silicon Valley Bank (SVB). SVB suffered a bank run and was forced to sell long-duration assets to meet redemption demand, which led to a short-term liquidity crunch. The Federal Deposit Insurance Corporation (FDIC) is currently managing the situation, and it is hoped that they will find a solution that protects customers’ assets 100%.
As a regulated payment token, USDC is redeemable 1 for 1 with the US Dollar, and its liquidity operations will resume as normal when banks open on Monday morning in the United States. However, as the issuance and redemption of USDC are constrained by the working hours of the US banking system, Circle in its recent statement said that it has taken steps to mitigate any potential risks.
USDC is 100% collateralized with a combination of cash and US Treasuries, with US Treasury Bills currently collateralizing 77% of USDC ($32.4 billion). The remaining 23% ($9.7 billion) is in cash, with $3.3 billion of USDC’s cash reserves still with SVB. However, Circle has initiated transfers of these funds to other banking partners and remains confident in the FDIC’s management of the SVB situation.
In the event that SVB does not return 100%, Circle has stated that it will stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary. As a result, USDC holders can be assured that their assets will remain protected.