USDC
USD Coin (USDC) is a stablecoin pegged to the U.S. dollar on a 1:1 basis, backed by a reserve of cash and short-term U.S. Treasury bonds. Launched in September 2018 by the Centre consortium, USDC is issued by regulated financial institutions. It aims to be "digital money for the digital age," facilitating cashless transactions. USDC serves various use cases, including a safe haven for crypto traders, enabling businesses to accept digital payments, and impacting sectors like decentralized finance and gaming. The goal is widespread acceptance across wallets, exchanges, and other platforms.
Moody warns of stablecoin adoption risk
Moody's Investors Service has warned that the recent turmoil in the traditional banking sector and USDC losing its peg could negatively impact stablecoin adoption and increase calls for regulation. The credit rating agency believes that fiat-backed stablecoins like USDC could face new resistance, limiting their stability and potentially causing a run on banks holding Circle's assets, which could lead to the depegging of other stablecoins.
Circle's Stablecoin USDC Affected by Collapsed Bank
Circle's USDC stablecoin briefly de-pegged after news that $3.3 billion of its cash reserves were stuck with collapsed bank Silicon Valley Bank. USDC's dollar peg has since recovered, but mass redemptions have led to a drop in the stablecoin's market cap by nearly 10% since March 11.
Depegging of USDC and DAI Saves Borrowers $100 Million
The depegging of USD Coin (USDC) and Dai (DAI) from the US dollar resulted in more than $2 billion in loan repayments on decentralized lending protocols Aave and Compound, with borrowers saving a total of over $100 million. USDC and DAI started heading back toward their peg, and repayment activity tapered off in the following days.
FTX Continues to Move Funds Amid Ongoing Investigations
Addresses associated with FTX and its subsidiary, Alameda Research, have reportedly transferred $145 million in stablecoins to various platforms, as the cryptocurrency exchange faces demands to return funds to different groups of investors amid ongoing investigations and lawsuits.
Binance converts remaining $1 billion in Industry Recovery Initiative to native crypto amidst concerns around stablecoins
Binance co-founder and CEO, Changpeng Zhao, announced on March 13 that the exchange will be converting the remaining $1 billion funds in its Industry Recovery Initiative to native crypto amid concerns surrounding stablecoins. This decision was made following the depegging of the USD Coin (USDC) stablecoin caused by the failure of three major crypto-friendly banks - Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank.
Circle Partners with Cross River Bank for USDC Production and Redemption
Circle has partnered with Cross River Bank for USDC production and redemption, as well as expanded relationships with other banking partners like BNY Mellon. The USDC stablecoin recently experienced a peg-breaking incident but has since recovered.
Circle Plans to Cover USDC Shortfall After SVB Shutdown
Circle, the issuer of the stablecoin USD Coin (USDC), has announced that it will use corporate resources to cover the shortfall on its reserves after Silicon Valley Bank (SVB) was shut down by the California Department of Financial Protection and Innovation. USDC liquidity operations will resume as normal when banks open on Monday, enabling redemption at 1:1 with the US dollar. The stablecoin lost its $1 peg on March 11, trading as low as $0.87, due to the disclosure of $3.3 billion of Circle's reserve held at SVB.
USDC Holders Panic Sell Amid Solvency Concerns
On March 10, concerns about the solvency of USD Coin (USDC) led several holders to panic sell their holdings and switch to other stablecoins. One user lost over 2 million USDC in a failed attempt to exchange them for Tether (USDT) using KyberSwap's decentralized exchange aggregator. Tron founder Justin Sun reportedly withdrew 82 million USDC and exchanged them for Dai (DAI) using Aave v2, while IOSG Ventures sold 118.73 million USDC for 105.67 million USDT and 2,756 Ether (ETH). The USDC price has since slowly recovered, and Circle, the company behind USDC, disclosed holding $3.3 billion at the Silicon Valley Bank.
Banks increase risks to stablecoins
The death of the Terra ecosystem triggered a bear market in 2022, causing losses in billions, affecting investor sentiment, and intensifying the regulatory spotlight over cryptocurrencies. Recently, Circle's disclosure that Silicon Valley Bank (SVB) did not process its $3.3 billion withdrawal request led to the depegging of its USD Coin (USDC). This event caused Binance CEO CZ to believe that traditional banks are a risk to stablecoins that are usually pegged 1:1 with fiat currencies, like the U.S. dollar.
Circle's USDC Reserve Exposure and Potential Risks
Circle's latest audit report reveals that the company's exposure to the US banking system stands at nearly $9 billion, with its reserves held by a number of regulated financial institutions, including SVB, BNY Mellon, and Silvergate. However, recent events such as the shutdown of SVB and Silvergate's decision to shut down its crypto bank arm have raised concerns about potential risks for Circle and its stablecoin USDC.