SVB Collapse Sparks Stablecoin Turmoil as USDC Loses Peg
USDC, a stablecoin linked to the dollar, lost its peg to the U.S. currency amid a surge of investor withdrawals after its founder, Circle Internet Financial Ltd., said it had $3.3 billion invested in the collapsed Silicon Valley Bank.
Circle's USDC stablecoin saw customers withdrawing billions in the last 24 hours with its market cap dropping to $37 billion from $43.5 billion, and the coin's price falling below $0.87 Saturday morning.USDC is the second-largest stablecoin in the cryptocurrency market after Tether, which has a market cap of $72 billion.
Silicon Valley Bank (SIVB) collapsed on Friday, marking the largest U.S. bank failure since the 2008 financial crisis,sending shockwaves through the banking sector. Circle and crypto exchange Coinbase created USDC in a joint venture announced in 2018.
«Following the confirmation at the end of today that the wires initiated on Thursday to remove balances were not yet processed, $3.3 billion of the ~$40 billion of USDC reserves remain at SVB,» a Circle tweet said.That $40 billion figure has now been reduced and almost 10% of the USDC reserves are now held in the failed bank. Stablecoins are used as a fiat-to-cryptocurrency on-ramp. The 1:1 peg to the U.S. dollar is based on investor trust and requires equal backing with U.S. dollar assets. Payments giants Visa (V) and Mastercard (MA) were both previously involved in the testing of crypto payments using USDC.
USDC rebounded from its lows later on Saturday after Circle said it would cover any shortfall and said it would resume redemptions early Monday. The cryptocurrency sector faces a major headache with another stablecoin in trouble. Tether and USDC had recently shad investor inflows as investors moved their funds from crypto
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