Circle Internet Financial, the issuer of the USDC stablecoin, has pledged to “cover any shortfall” in the assets backing the stablecoin. This comes as the company did not receive the entirety of a $3.3 billion cash reserve held at Silicon Valley Bank (SVB) after the Federal Deposit Insurance Corporation (FDIC) seized the bank’s assets.z
Circle stated that it attempted to move its assets out before SVB’s collapse and the transaction could settle on Monday, when US banks resume normal operations. However, the company also mentioned that it is possible that SVB may not return 100% and that any return might take some time. As a result, Circle has decided to stand behind USDC and cover any shortfall using corporate resources, involving external capital if necessary.
The value of the USDC stablecoin fell as low as $0.88 in the last 24 hours before rebounding to $0.97 after the announcement. Crypto traders were concerned about the value of USDC, which is meant to be pegged to the US dollar, but fell in value after SVB’s collapse.
Also Read: USD Coin Reserves Hit by Silicon Valley Bank Collapse, Investors Rush to Sell
Circle’s USDC instability has caused a domino effect on the stablecoin ecosystem, with major stablecoins like DAI and USD Digital (USDD) depegging from the U.S. dollar. DAI, which had 51.87% of its collateral represented by USDC, lost 7.4% of its value after USDC depegged. USD Digital (USDD) and Frax (FRAX) also experienced a drop in value, with USDD falling by nearly 7.5% and FRAX dipping even further. This sell-off has put a spotlight on the need for stablecoin providers to ensure adequate reserve management to prevent any such fallout in the future.
