A stablecoin issuer, Circle claimed that the issue of $3.3B USDC reserve deposited at Silicon Valley Bank has been resolved after U.S. regulators promised total claim for all depositors of two dysfunctional banks, Silicon Valley Bank and Signature Bank.
Circle assured its depositors and investors that USDC tokens will be redeemable 1:1 with the U.S. Dollar from Monday.
On Sunday, the Federal Reserve Board unveiled a joint effort with the Department of the Treasury to safeguard the depositor held in collapsed banks. The federal authorities announced additional funding for eligible depository institutions by forming a new Bank Term Funding Program (BTFP).
The program will allow the Federal Deposit Insurance Corporation (FDIC) to make complete settlements with depositors of Silicon Valley Bank and Signature Bank. In a press release, the federal reserve board stated that the FDIC resolution will “fully protects all depositors, both insured and uninsured”.
It means Circle will also be eligible to claim its $3.3B USDC reserve deposit held at Silicon Valley Bank, which is about 8% of the USDC total reserve.
However, Circle has already revealed its preparation “to handle significant volume, built on the strong liquidity and reserve assets discussed below”. It also showed a readiness to cover any shortfall using corporate resources, involving external capital if necessary.
On March 11, Circle stated in a press release that USDC liquidity operations will be continued, relieving the stress of investors about possible USDC withdrawal suspension.
Jeremy Allaire, Co-founder and CEO of Circle, said, “We are heartened to see the U.S. government and financial regulators take crucial steps to mitigate risks extending from the banking system. We’ve long advocated for full-reserve digital currency banking that insulates our base layer of internet money and payment systems from fractional reserve banking risk.”
Currently, Circle’s 77% ($32.4B) USDC reserve is collateralized with US Treasury Bills for the short term and 23% ($9.7B) USDC reserve is held in cash.
Also Read: USDC Faces De-peg after disclosing $3.3B Deposit in SVB
Furthermore, Circle unveiled its fresh partnership with banks to support automated USDC minting and redemption for customers, which will activate this week.
