by The financial sector experienced some chaotic days. Specifically for the USDC stablecoin and Silicon Valley Bank and its stakeholders as the lender went from being sound and profitable to being shut down by the authorities in less than 48 hours.
Now a lifebuoy has just been thrown to save the sinking shore and others in trouble.
The U.S. government and financial regulators have announced that those with assets deposited in a struggling Silicon Valley bank will have access to their funds.
USDC Reserves available today
In a Monday tweet, Circle co-founder and CEO Jeremy Allaire revealed that the company was “energized” by the U.S. Federal Reserve’s efforts to address the risks posed by the “fractional” banking system.
Please update the thread on USDC
We were heartened to see the US government and financial regulators take key steps to mitigate the risks associated with the fractional banking system.
100% of SVB deposits are safe and will be available tomorrow in open banking.
— Jeremy Allaire (@jerallaire) March 12, 2023
Allaire stated that “100%” of Silicon Valley Bank’s deposits are safe and will be available when the bank opens today, March 13.
In his tweet, Allaire added that the company will rely on BNY Mellon to facilitate the minting and buyout process.
Source: Getty Images
Circle revealed late Friday that approximately $3.3 billion of its $40 billion USDC reserves remained with Silicon Valley Bank. It comes after the tech-focused lender’s share price plummeted in reaction to a panicked consumer turning to deposits.
Moments after the capital crisis led to the second largest collapse of an American financial institution in history, the collapse of SVB sent shockwaves through cryptocurrencies and global markets.
Allaire said:
“We are committed to building robust and automated USDC clearing and reserve operations with the highest quality and transparency.”
US government to the rescue
On Sunday evening, US regulators announced emergency measures to contain the contagion caused by the collapse of SVB, headquartered in Santa Clara, California, and to guarantee the protection of all depositors.
The announcement was made in a joint statement by US Treasury Secretary Janet Yellen, Federal Reserve Chairman Jerome Powell and Federal Deposit Insurance Corporation chairman Martin Gruenberg.
“Today, we are taking decisive action to protect the U.S. economy by strengthening public confidence in our banking system,” the joint press release said.
According to the statement, after receiving recommendations from the FDIC and Federal Reserve boards, depositors will have full access to their funds starting March 13.
“To support U.S. businesses and households, the Federal Reserve Board announced Sunday that it will make additional funds available to eligible depository institutions to help ensure banks can meet the needs of all their depositors,” the press release added.
To help banks, savings organizations, credit unions and other eligible depository institutions, the Federal Reserve Board announced in a separate statement the creation of the $25 billion Bank Financing Program (BTFP), which provides loans for up to one year.
Circle Assured From Loss
This means that Circle will not suffer a loss of funds as a result of the rescue as depositors will be restored to their original condition.
The U.S. government’s emergency procedures were also extended to other financial institutions, including the now-defunct Signature Bank.
Meanwhile, the Payment Stablecoin Act, which is still being actively pursued by Congress, would legally establish a system where stablecoin money would be held alongside U.S. central bank cash and short-term Treasury bills, Allaire noted.
“We need this law now more than ever if we want a truly safe financial system,” Circle’s CEO said.
Indeed, the Payment Stablecoin Act, which remains a very active push by Congress, would legally guarantee a regime where stablecoin funds would be held with cash at the Fed and short-term Treasury bills. We need this law now more than ever if we want a truly secure financial system.
— Jeremy Allaire (@jerallaire) March 12, 2023
Crypto total market cap currently at $994 billion on the daily chart | Chart: TradingView.com
USDC recovers the dollar exchange rate; Bitcoin up
Dow Jones Industrial Average futures rose more than 300 points in pre-market trading in response to developments.
Data from crypto market tracker Coingecko shows that cryptocurrency prices have also improved significantly, with Bitcoin rising 10% in the last 24 hours.
USDC Circle, the second largest stablecoin, recovers to $1 after Allaire was assured that its holdings were safe.
According to Coingecko data, USDC is currently trading at $0.99, up 3.3% in the last 24 hours.
-Featured image from Freepik
