Circle’s USDC Stablecoin Depegs on $3.3 Billion SVB Exposure

USD Coin, the stablecoin issued by Circle Internet Financial Ltd., fell further from its dollar peg and traded as low as 90 cents as investors reacted to the firm’s exposure to the collapsed Silicon Valley Bank.

Circle said $3.3 billion of its about $40 billion of reserves backing the stablecoin remain at Silicon Valley Bank, which became one of the largest bank failures in US history on Friday. 

Circle’s stablecoin, Also known as USDC, Was trading at about 94 cents as of 12:37 p.m. in Singapore on Saturday. It’s the second-largest stablecoin in crypto, with a circulating supply of about 41 billion, according to CoinGecko data. 

The fall in USDC has had a knock-on effect on decentralized finance applications which let users trade, borrow and lend coins and which tend to rely heavily on trading pairs involving the stablecoin. 

Circle’s Chief Strategy Officer Dante Disparte described the fall of Silicon Valley Bank as a “black swan failure” in the US financial system, saying in a tweet that without a federal rescue plan there would be “broader implications for business, banking and entrepreneurs.”

As the selloff in USDC worsened, Coinbase Global Inc. said it would be “temporarily pausing” the conversion of USDC into US dollars during the weekend, and would resume on Monday when banks open. 

“Unless there’s a concrete bailout plan this weekend, I think markets will be ugly again next week,” said Teong Hng, chief executive officer at crypto investment firm Satori Research. 

Asset-backed stablecoins like USDC are intended to hold a set value against another, highly liquid asset like the US dollar. They come in a variety of forms and some, like Circle’s, are underpinned by reserves like cash and bonds. Investors often park funds in stablecoins as they move between crypto trades.

Crypto firms including BINANCE and Tether on Friday used Twitter to reassure their customers about any risks posed by the failed bank.

Changpeng Zhao, chief executive officer at Binance, the largest digital-asset exchange, said in a tweet that the firm doesn’t have exposure and its funds are safe. 

Stablecoin issuer Paxos and crypto exchange Gemini said they have no relationship with the bank, according to statements on their official Twitter accounts. Tether Chief Technology Officer Paolo Ardoino said in a tweet that the largest stablecoin doesn’t have exposure to SVB.

By contrast, bankrupt crypto lender has about $227 million in an account at the failed bank, according to a court filing.

— With assistance by David Pan