USDC will remain redeemable 1 for 1 with U.S. dollar, Circle says

Quick Take

  • USDC issuer Circle will cover any USDC shortfalls with corporate resources, the company said.
  • Circle said its operations will resume as usual on Monday and that its flagship stablecoin will be redeemable one-for-one with the U.S. dollar.

Circle said it will resume normal operations when U.S. banks open Monday and that its flagship stablecoin USDC will remain redeemable one-for-one with the U.S. dollar after Silicon Valley Bank collapsed holding $3.3 billion of the company’s reserves.

Circle said it is required to cover any shortfall caused by SVB’s failure and will seek outside financing if necessary.

USDC lost its peg shortly after SVB collapsed and dropped to as low as $0.88. The company has $3.3 billion of its reserves behind the stablecoin in the failed bank, which is popular among tech firms.

Regulators closed SVB on Friday and the Federal Deposit Insurance Corporation stepped in as the bank’s receiver.

Circle is “hopeful” that the FDIC will seek a purchaser for SVB that will “ensure all depositors are made whole.” Returns for clients could take time, however. Circle’s stablecoin is collateralized with a combination of cash and U.S. Treasurys. Three-quarters of its collateral is made up of $32.4 billion in U.S. Treasury Bills, while 23%, or $9.7 billion, is made up of cash held at several institutions.

The company initiated transfers of its $3.3 billion SVB funds on Thursday, but they hadn’t settled when the bank collapsed at the end of the day on Friday.

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“We have reason to believe that under applicable FDIC policy, transfers initiated prior to a bank entering receivership would have otherwise been processed normally,” Circle said. “In other words, the FDIC should allow transactions to settle in the ordinary course through the end of a bank’s standard daily processing cycle until the FDIC takes control of the failed institution.”

Before Silicon Valley Bank collapsed, Circle deposited $5.4 billion of its USDC cash reserves with BNY Mellon. Another $1 billion of its cash reserves is held at Customers Bank, and Circle has transaction and settlement accounts for USDC at Signature Bank.

The SVB chaos comes days after the crypto-friendly Silvergate Bank said it would liquidate and wind down operations. Circle said it transferred its “limited reserves” out of Silvergate before it shutttered.

SVB’s failure sent shockwaves through t