The recent news of the USDC stablecoin losing its peg to $1 has caused quite a stir in the cryptocurrency community. However, according to Circle’s chief strategy officer, Dante Disparte, things aren’t as bad as they may seem.
USDC Has Lost The Peg
As of March 11, USDC was trading at $0.91, a significant drop from its $1 peg. That occurred after Circle revealed that it could not withdraw $3.3 billion of its $40 billion reserves from Silicon Valley Bank (SVB), causing a sell-off in the stablecoin.
Circle had initiated a wire transfer on March 9 to remove its funds from SVB, as the bank was about to shut operations. However, the wire transfer was not wholly processed. As a result, $3.3 billion of USDC reserves were still with SVB.
1/ 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.
— Circle (@circle) March 11, 2023
Disparte believes that SVB’s failure, without a federal rescue plan, will have broader implications for businesses, banking, and entrepreneurs. He warned that SVB is critical to the US economy and called for immediate action to prevent a potential crisis.
Despite the current situation, it’s important to note that the USDC stablecoin will eventually reclaim its $1 peg. That is because Circle has ample financial reserves in cash and T-bills. The interest from the latter should offset any potential gaps left by the banking crisis.
Good comparable for FDIC recovery process – entity got 62% of balances paid out right away under FDIC "advanced dividend" process, and by final payment had recovered 94%
If similar at SIVB then Circle's max damage is $198M on $3.3B.
Easily covered from interest earnings. pic.twitter.com/IX9jhXEh1b
— Adam Cochran (adamscochran.eth) (@adamscochran) March 11, 2023
Circle Has A Plan To Keep Everyone Safe
Moreover, Circle recently announced plans to increase its staff headcount by 25%, a positive sign for the company’s future. Circle’s Chief Financial Officer, Jeremy Fox-Geen, shared his intent to go public pending an improvement in market conditions.
He added that the crypto industry needs more distance from the Terra and FTX implosions for public investors to re-evaluate the future of digital-assets businesses.
While the recent events surrounding the USDC stablecoin have caused some concern, there is still hope for businesses and entrepreneurs.
Circle’s financial reserves and growth plans provide a positive outlook for the future of the company and the broader cryptocurrency industry. However, it remains to be seen what actions the federal government will take to prevent a potential crisis caused by SVB’s failure.
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