The United States witnessed the largest bank collapse last weekend since the 2008 financial crisis. Silicon Vally Bank (SVB) has gone under the Federal Deposit Insurance Corporation (FIDC) receivership, as the lender could not sustain its operations.
The fallout has massive implications for the tech industry, as the bank strictly focused on that sector. Stablecoin issuer Circle held $3.3 billion or 8 percent of the funds backing the USDC at Silicon Valley Bank. The FIDC only insures deposits up to $250,000, meaning Circle’s stablecoin peg is in jeopardy.
However, Circle and other depositors of SVB will have access to their funds on Monday to continue operations without any hiccups, Treasury Secretary Janet Yellen, Federal Reserve Chair Jerome Powell, and FIDC Chairman Martin Gruenberg said in a joint statement on Sunday.
“After receiving a recommendation from the boards of the FDIC and the Federal Reserve, and consulting with the President, Secretary Yellen approved actions enabling the FDIC to complete its resolution of Silicon Valley Bank, Santa Clara, California, in a manner that fully protects all depositors, both insured and uninsured,” the regulatory statement added.
At my direction, @SecYellen and my National Economic Council Director worked with banking regulators to address problems at Silicon Valley Bank and Signature Bank.
I’m pleased they reached a solution that protects workers, small businesses, taxpayers, and our financial system. https://t.co/CxcdvLVP6l
— President Biden (@POTUS) March 13, 2023
In an official press release following the regulatory assurance, Circle announced an automated USDC minting and redemption for customers through its new banking partner.
“We are heartened to see the US 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,” said the Co-Founder and CEO of Circle, Jeremy Allaire.
USDC has a market cap of over $40 billion, meaning Circle holds $40 billion in cash or other assets as pegged to the stablecoin. The company revealed that about 25 percent of its reserves are in cash held across six banks.
On Sunday, Signature Bank also went under as the New York officials shuttered the lender “to protect depositors.” Circle confirmed that it does not hold any cash…
